The Federal Housing Administration and the Mortgage Market

FHA Special Loan Programs

- Energy Efficient Mortgage - Home Equity Conversion Mortgage - Good Neighbor Next Door - Homeownership Voucher Assistance - Programs for Native Americans - Disaster Relief

Who's will benefit from the FHA loan program?

- Sally has reasonably good credit, but only $2,000 to put toward a down payment. - Nicholas has some credit issues, though he has a good job.

Homeownership Voucher Assistance

Allows participants to use Housing Choice Voucher funds, which are normally used to pay rent, to help pay monthly homeownership expenses. Applicants must be first-time homeowners, have at least one employed family member, and meet minimum income requirements.

Energy Efficient Mortgage

Allows the borrower to incorporate the cost of adding energy efficient features to new or existing houses in combination with a 203(b) or 203(k) loan, or for 203(h) in connection with a disaster.

The Federal Housing Administration's qualifying standards for a mortgage loan ______, but the mortgage insurance the FHA provides balances the risk for the lender.

Are somewhat less stringent than standards for conventional loans FHA qualification standards are less stringent than standards for conventional loans, but a down payment is required.

Title II, Section 203(b)

Beverly has applied for a loan to purchase a Craftsman-style home for herself and her teenage son. Her mortgage broker helps her find an FHA loan program that accommodates her low down payment. Which program will serve Beverly's needs?

Section 221(d) (3) and (4):

Construction of multi-family rental or cooperative projects

Stan builds new homes. He feels good knowing that he's providing safe and healthy homes for the community and that they are quality structures that will shelter people for many years to come. Which FHA benefit is at work here?

Construction standards

Match each description with the name of the FHA loan program that applies. A 90-day moratorium on foreclosures for homeowners with an FHA loan who are trying to repair or rebuild after a natural disaster.

Disaster Relief

Match each description with the name of the FHA loan program that applies. Allows the borrower to incorporate the cost of adding energy-efficient features in combination with an FHA-insured mortgage

Energy Efficient Mortgage

Match each description with the name of the FHA loan program that applies. Law enforcement, teachers, firefighters, and EMTs get a 50% discount on certain foreclosed FHA-insured properties

Good Neighbor Next Door

The FHA loan program is designed for borrowers who ______.

Have a minimal down payment and less-than stellar credit

Which of these programs is aimed at first-time homebuyers?

Homeownership Voucher Assistance The voucher assistance program could help eligible homeowners keep their home during a financially difficult period.

Disaster Relief

In addition to the 203(h) program (mortgage insurance for homeowners in presidentially designated disaster areas who require major repair or replacement of a damaged home), the FHA has placed a 90-day moratorium on foreclosures for homeowners with an FHA loan who are trying to repair or rebuild after a natural disaster. Loan servicers are required to work with the homeowner on payments, including waiving late charges; lenders are also required to release homeowner insurance proceeds to the borrower.

Section 251:

Loan insurance for adjustable rate mortgages

Section 255:

Loan insurance for reverse mortgages for borrowers age 62 or older

Monty has certain goals in life, and most of those goals revolve around making money. He loves following the market and deciding where to invest his money. What is available to people like Monty as a result of stability in the mortgage industry created by the FHA?

MBS investment Stabilizing the mortgage market led to a global investment market in mortgage-backed securities.

Lenders who ______ can underwrite and approve FHA loans without requiring the FHA to review each borrower's qualifications.

Participate in the direct endorsement program The FHA allows lenders to perform all of the steps for qualification and approval of FHA loans, following FHA guidelines, when they participate in the direct endorsement program.

Match each description with the name of the FHA loan program that applies. Mortgage insurance for Native Americans to construct, acquire, refinance, or rehabilitate single-family housing located on tribal land

Programs for Native Americans

Section 234(c):

Purchase of a single condo unit

Section 203(n):

Purchase of a unit in a cooperative housing project

Section 203(b):

Purchase of one- to four-family homes

Section 223(e):

Purchase or rehabilitation of a home in an older, declining urban area

Title I, Purchase of Manufactured Housing

The loan may be used to purchase a manufactured house on a developed lot, to develop a lot for a manufactured home, or a combination of the two.

Title I, Property Improvements

This is loan insurance for moderate rehabilitation of properties, such as alterations, repairs, and site improvements on single-family homes

Good Neighbor Next Door Program

This program provides law enforcement officers, K-12 teachers, firefighters, and EMTs a deal on purchasing foreclosed FHA-insured properties in revitalization areas. Eligible buyers receive a 50% discount off list price with a down payment of only $100, provided the buyer lives in the property for three years.

Title II

Title II covers loan insurance for many properties and situations. Each program has its own rules.

Programs for Native Americans

FHA guarantees mortgage loans for Native Americans under its Section 248 program. The loans guaranteed under the program are used to construct, acquire, refinance, or rehabilitate single family housing located on trust land or land located in an Indian or Native Alaskan area. HUD's Section 184 program is insurance for loans made to Native Americans to purchase, build, or rehabilitate property located on or off tribal lands. Section 184 loans can also be used to refinance. These loans are fundamentally the same as regular Section 203(b) loans, except that they are only available to Native Americans, primarily on Indian land. They also require an agreement with the tribal council in charge of the land where the property is located.

Home Equity Conversion Mortgage (HECM)

Insurance of a reverse mortgage for homeowners age 62 and older who want to borrow against their home equity as a lump sum or on a monthly basis (for life or a specified term).

Title II covers loan insurance for many properties and situations. Some of the options available from FHA are:

Section 203(b): Purchase of one- to four-family homes Section 203(h): Victims of disasters may receive 100% financing to reconstruct or replace a damaged home if they file within one year of the disaster Section 203(n): Purchase of a unit in a cooperative housing project Section 221(d) (3) and (4): Construction of multi-family rental or cooperative projects Section 223(e): Purchase or rehabilitation of a home in an older, declining urban area Section 234(c): Purchase of a single condo unit Section 251: Loan insurance for adjustable rate mortgages Section 255: Loan insurance for reverse mortgages for borrowers age 62 or older

Who won't benefit from the FHA loan program

Stan is selling his current home and has enough equity to make a sizable down payment on his next purchase.

Section 203(h):

Victims of disasters may receive 100% financing to reconstruct or replace a damaged home if they file within one year of the disaster

Home Equity Conversion Mortgage (HECM)

Which loan program is only available to homeowners who are 62 or older? FHA special programs target specific groups, such as senior homeowners with home equity but limited cash.