| FHA Loan Programs |
FHASecure
WASHINGTON - President George W. Bush today announced
that HUD's Federal Housing Administration (FHA) will help an
estimated 240,000 families avoid foreclosure by enhancing its
refinancing program effective immediately. Under the new
FHASecure plan, FHA will allow families with strong credit
histories who had been making timely mortgage payments
before their loans reset-but are now in default-to qualify for
refinancing.
In addition, FHA will implement risk-based premiums that match
the borrower's credit profile with the insurance premium they
pay-i.e., riskier borrowers pay more. This common-sense,
risk-based pricing structure will begin on January 1, 2008.
"Many hard-working American families who were able to make
their mortgage payments under the initial teaser terms of the
exotic loan are now struggling to make ends meet because their
rates have doubled or tripled," said HUD Secretary Alphonso
Jackson. "FHASecure will bring stability to the housing market
and give eligible families who were in good financial standing
before their loans reset a chance to keep their homes."
that HUD's Federal Housing Administration (FHA) will help an
estimated 240,000 families avoid foreclosure by enhancing its
refinancing program effective immediately. Under the new
FHASecure plan, FHA will allow families with strong credit
histories who had been making timely mortgage payments
before their loans reset-but are now in default-to qualify for
refinancing.
In addition, FHA will implement risk-based premiums that match
the borrower's credit profile with the insurance premium they
pay-i.e., riskier borrowers pay more. This common-sense,
risk-based pricing structure will begin on January 1, 2008.
"Many hard-working American families who were able to make
their mortgage payments under the initial teaser terms of the
exotic loan are now struggling to make ends meet because their
rates have doubled or tripled," said HUD Secretary Alphonso
Jackson. "FHASecure will bring stability to the housing market
and give eligible families who were in good financial standing
before their loans reset a chance to keep their homes."
The combination of FHASecure and risk-based premium pricing will permit FHA to return to the role it was
originally designed to play, bringing stability to the real estate market by helping break today's cycle of
foreclosures and price depreciation and creating much needed liquidity in the now-constricted mortgage
market.
FHA has recently experienced a substantial increase in the number of conventional borrowers refinancing
into FHA products. With FHASecure, it can help even more. The number of these refinancing transactions
has tripled since the start of 2006. FHA's transactions are projected to surpass 100,000 loans by the end of
the fiscal year. To date, these figures do not include refinances for delinquent borrowers.
The FHASecure initiative will operate under the same safe guidelines as the FHA's existing mortgage
insurance program without affecting FHA's financial health. Eligible homeowners will be required to meet strict
underwriting guidelines and pay a mortgage insurance premium, which offsets the risk to FHA's insurance
fund at no cost to the taxpayer.
The risk-based insurance premium structure will further expand FHA's reach to additional underserved
borrowers, particularly minorities and first-time homebuyers who have been disproportionately lured into
exotic mortgages, and enhance the FHA's overall risk management. The move to risk-based premiums
ensures that FHA remains on solid financial footing as a self-financed agency for the long-term.
FHASecure, like all FHA products, will be underwritten to ensure the borrowers have the ability to repay the
loan, will require escrow for taxes and insurance, and will continue to offer unprecedented foreclosure
prevention assistance. The FHA has never permitted and will not include pre-payment penalties or teaser
rates that are common in exotic mortgages and have caused much of the current market troubles.
To qualify for FHASecure, eligible homeowners must meet the following five criteria:
A history of on-time mortgage payments before the borrower's teaser rates expired and loans reset;
Interest rates must have or will reset between June 2005 and December 2009;
Three percent cash or equity in the home;
A sustained history of employment; and
Sufficient income to make the mortgage payment.
"FHASecure is designed for families who are good borrowers but were steered into high-cost loans with
teaser rates," said Assistant Secretary for Housing-FHA Commissioner Brian Montgomery. "These
homeowners, many of whom are minorities, need a safe, affordable mortgage product that will help build
wealth. All FHA borrowers pay mortgage insurance premiums to offset claims to the FHA insurance fund and
ultimately prevent risk to the taxpayer."
FHASecure will also bring much-needed liquidity to the mortgage market. FHA anticipates more lenders will
offer FHA-insured loans, pool them, and securitize them with the Government National Mortgage Association
(Ginnie Mae), which has the full faith and credit of the U.S. government. This guarantee makes Ginnie Mae's
mortgage-backed securities the safest on the market and helps to channel greater capital into the housing
market, benefiting U.S. homeowners.
Since its inception in 1934, FHA has helped almost 35 million people become homeowners, making it the
largest insurer of mortgages in the world. The 109th Congress introduced the Expanding American
Homeownership Act in June 2006 which would enable FHA to be a safe option for more underserved low- and
moderate-income and minority families so they can achieve the American Dream of homeownership. Today,
President Bush also urged Congress to quickly pass the Administration's FHA modernization proposal to help
more families in need.
BUSH ADMINISTRATION TO HELP NEARLY ONE-
QUARTER OF A MILLION HOMEOWNERS
REFINANCE, KEEP THEIR HOMES
FHA to implement new “FHASecure” refinancing
product
QUARTER OF A MILLION HOMEOWNERS
REFINANCE, KEEP THEIR HOMES
FHA to implement new “FHASecure” refinancing
product
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