The document discusses the mission and goals of the Federal Housing Administration (FHA) to promote homeownership opportunities. It outlines FHA's benefits such as more flexible underwriting guidelines that allow alternative credit qualifications and higher debt-to-income ratios. The document also summarizes FHA's mortgage insurance programs, underwriting requirements for borrowers and properties, how FHA compares to conventional loans, and resources for additional information.

1. Company
LOGO
U.S. Department of Housing And
Urban Development
October 2010
FHA TODAY

2. Today’s Agenda
 FHA’s Mission and Goals
 Benefits to an FHA loan
 How FHA compares to other mortgage
programs
 FHA Resources

3. FHA-Established June 28, 1934
Our Mission
 Help people realize the “American Dream”
of homeownership
 Stabilize and Revitalize Communities
 Promote Economic Growth
 Reduce Defaults/Preserve Neighborhoods

4. FHA’S Goals
 Educate Consumers to make informed
choices
 Enable individuals to
 Own homes
 Build equity in their homes
 Simplify the home buying process
 Removing regulatory barriers

5. FHA’S Goals (Continued)
Provide homeownership and home retention
opportunities to the underserved such as:
 First time homebuyers
 Minorities
 The elderly
 Embrace innovative financing
 Down payment assistance
 Silent second

6. Feel Secure With FHA:
Mortgage Insurance
 FHA only insures mortgages
 Similar to private mortgage insurance
 Protects lenders against mortgage loss
 Similar to private mortgage insurance
 Encourages lender flexibility in loan approval
 Additional risk covered by insurance
 Protects buyers from unfair practices

7. FHA Mortgage Insurance (Cont.)
Upfront Mortgage Insurance Premium
 Also known as: UFMIP
 May be financed
Monthly Mortgage Insurance Premiums
 Also known as: MIP
Required on all loan types
Money collected is used to pay claims

8. Mortgagee Letter 2010 – 02
January 2010
Increase Of Upfront Premiums for FHA
Mortgage
 Effective for case numbers issued on or
after April 5, 2010
 Purchase money and full credit
qualifying refinance
 Increased to 2.25%
 Streamline refinances – all types
 Increased to 2.25%
 No change to annual/monthly premiums
Changes again in October 2010

9. Mortgage Insurance Premiums (Cont.)
Effective October 4, 2010
Decrease UFMIP/Increase Monthly for case numbers assigned on or after October 4, 2010

10. Mortgage Insurance Premiums (Cont.)
Decrease UFMIP/Increase Monthly for case numbers assigned on or after October 4, 2010

11. Benefits Of FHA Loans
 Ease in qualifying borrower
Alternative credit and self-employed – okay
Manual underwriting acceptable
Qualifying ratios 31%/43%
May be higher with compensating factors
or automated TOTAL Scorecard approval

12. Other Benefits
No prepayment penalty
Fully assumable mortgage
 Credit qualifying required
Streamlined refinance (Mortgagee Letter 2009 – 32)
 FHA loan to FHA Loan
 Simplified qualifying

13. Additional Benefits
 Loss mitigation/foreclosure prevention
 Forbearance
 Loan modification
 Partial claim
 FHA – Home Affordable Mortgage
Program
 Short/Compromise Sale with
incentives
 Deed-in-lieu of foreclosure

14. Minimum Required Investment
 Minimum cash investment – down payment
 3.5% of appraised value or sales price
Whichever is less
 Sales price greater than appraised value
then also need to pay difference
 No longer calculated on “acquisition cost”
 Secretary of HUD has authority to amend
minimum required investment
 Can set higher, but not lower required borrower
investment

15. Minimum Required Investment –
Cont.
 May come from borrower’s own funds or
 100% gift
 Immediate family member/close familial tie
 HUD approved non-profit organization
 Acceptable secondary financing
 Local city, county, and state programs
 All seller-assisted down payment
assistance eliminated

16. Minimum Credit Scores and
Loan-to-Value Ratios – Continued
Maximum loan-to-value limits based on credit scores
 Score of 580 or greater 97.75%
 Scores between 500 to 579 90%
 Scores less than 500 Not eligible
 Disaster Relief Program
 Score of 500 or greater 100%
 Below 500 Not eligible
 Borrowers in negative equity position
 Refer to Mortgagee Letter 2010 – 23

17. The FHA Borrower
 Must occupy the property as primary
residence
 Must be a legal resident
U.S. citizen
Lawful permanent resident aliens
Non-permanent resident aliens
 Must have valid Social Security Number
(T.I.N. unacceptable)

18. The FHA Borrower - Continued
 Only one (1) FHA loan allowed
Some exceptions
See Mortgagee Letter 2008 – 25
 May be HUD approved non-profit or
government agency
 Borrower(s) can hold title in Inter-Vivos
(living) Trust
 May be co-borrower or co-signer

19. The FHA Property
 1 – 4 Unit dwellings
 SFR, PUD, Condo (attached, detached, high
and low rise)
 Manufactured Homes
 Existing or New Construction
 Must meet HUD Minimum Property
Requirements (M.P.R.’s)
 Owner occupancy required

20. How Does FHA Compare To
The Industry ?
Competitive interest rates
Financing up to 105% CLTV (or more)
on purchases
With approved secondary financing
Maximum 100% “typically”

21. How Does FHA Compare To The
Industry ?
FHA’s 1-1, 3-1, 5-1 ARM adjustment and life caps better
1-1 and 3-1 ARM
FHA - 1% per adjustment – 5% Life
Industry - 2% or more (1-1, 3-1) – 6% Life
5-1 ARM
FHA – 1% per adjustment –5% life
Industry - 5% first adjustment – 5% Life
10 years to reach life cap on FHA 5-1 ARM

22. More Comparisons
Contributions by third party 6%
regardless of LTV/CLTV
 VS. 3% over 95% LTV/CLTV
Manual underwriting allowed
 All loan types
Automated underwriting not required
Maximum financing allowed for
Manufactured Homes

23. Where to Get More Information
 1 – 800 – CALL – FHA (1 – 800 – 225 – 5342)
 A source for all FHA questions
 Industry partners and Consumers
 www.hud.gov
 On-line resource for info about FHA and FHA
programs
 On-line source for all other HUD programs, grants,
forms, press releases, etc.
 User friendly
 www.fhaoutreach.gov/FHAFAQ
 On-line resource to frequently asked questions

24. www.hud.gov

25. www.hud.gov

26. www.fhaoutreach.gov/FHAFAQ

27. Agenda For Webinar
November 16, 2010
 Previous changes
 Housing & Econ. Recovery Act changes
 1 – 4 Unit mortgage program
 Condominium program
 Streamline and Rehabilitation loan
 Energy Efficient Mortgage (EEM)
 Solar and Weatherization

28. The U.S. Department of Housing and Urban Development
would like to thank the
California Association of Mortgage Professionals
and
Oregon Association of Mortgage Professionals
and its’ members
for your interest in
FHA and FHA programs