‘FHASecure’ to help homeowners facing foreclosure

WASHINGTON – Sept. 4, 2007 – On Friday, Pres. Bush announced Federal Housing Administration (FHA) changes, called “FHASecure,” to help homeowners avoid foreclosure. The National Association of Realtors® (NAR) praised the move.

“NAR has been advocating for many of these FHA changes since early 2007,” says 2007 President Pat V. Combs. “In letters, testimony, speeches and meetings, we have encouraged both Congress and the U.S. Department of Housing and Urban Development (HUD) to make meaningful changes to the FHA that would stem rising foreclosures.

Under the 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. The risk-based pricing structure will begin on Jan. 1, 2008.

FHA has recently experienced an threefold increase in the number of conventional borrowers refinancing into FHA products, with total 2007 transactions projected to surpass 100,000 loans. The FHASecure program is expected to increase that number. The number of these refinancing transactions has tripled since the start of 2006.

The FHASecure initiative will operate under the same guidelines as FHA’s existing mortgage insurance program. Eligible homeowners will be required to meet strict underwriting guidelines and pay a mortgage insurance premium. FHASecure 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 foreclosure prevention assistance. FHA does not include pre-payment penalties or use teaser rates.

To qualify for FHASecure, eligible homeowners must meet the following five criteria:

1. A history of on-time mortgage payments before teaser rates expired and loans reset.
2. An interest rates resets between June 2005 and December 2009.
3. 3 percent cash or equity in the home.
4. A sustained history of employment.
5. Sufficient income to make the mortgage payment.

In addition to helping homeowners, FHASecure should bring liquidity to the mortgage market. FHA expects more lenders to offer FHA-insured loans, pool them and securitize them with the Government National Mortgage Association (Ginnie Mae). Since the U.S. government backs Ginnie Mae, it’s mortgage-backed securities appeal to investors looking for low risk, which should channel greater capital into the housing market.

For more information about FHASecure and other FHA products, call (800) CALL-FHA or visit www.fha.gov or www.hud.gov. For a list of local homeownership centers or a HUD-approved housing counseling center, go to www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm

© 2007 FLORIDA ASSOCIATION OF REALTORS®

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