Friday, October 3, 2008



On Wednesday, Oct.1, a government program took effect which will change the financial picture of many home purchasers and homeowners.

A program, known as ‘Hope for Homeowners’, is part of a huge housing bill passed this summer by Congress, as an effort to help alleviate the mortgage crisis. Its goal is to prevent foreclosures by allowing borrowers in default, and those in
distress, close to default, to refinance their mortgages to more affordable loans.

$300 billion is allocated for the refinance to fixed rate FHA insured loans, at no more than 90% of current market value. Also, borrowers mortgage payments must exceed 31% of their income to qualify. NOTE: loans originated in 2008, except Jan 1 are excluded. Additionally, 6 months of payments must have been made by borrowers.

But, the impact on the foreclosure rate is questionable, as lenders are not required to participate in the program. The lenders actually take a loss on the original loans. However, lenders from the top mortgage businesses indicated they’re adding new staff to assist the implementation of the program.

Other noteworthy issues addressed:

• Seller funded down payment assistance programs for FHA loans have been eliminated.This will practically eliminate no down payment offers. This ban was requested by the FHA, citing the 3 times higher default rate for down payment assisted loans over the traditional FHA loans. Also, they feel market values are inflated with those programs.

• A one-year freeze on “risk-based” FHA loan insurance premiums is in effect. The risk-based program charged borrowers on the basis of the likelihood of the loan repayment.

• FHA-insured loans on condominiums has been streamlined.

• The FHA loan process for manufactured homes has been reformed.

• A new program has been put in place for generating alternative credit-rating information for people with little credit history.

• Reverse-mortgage borrowers are affected by a requirement for “adequate counseling” from a third party not tied to the lender. The government, with funds from mortgage insurance premiums, can create a counseling program.

• Possible conflicts of interest will be reduced due to reverse-mortgage loan originators being forbidden from selling annuities, insurance or other financial products.

• A cap of $6000 was placed on origination fees, and can be adjusted periodically for inflation.

If you have questions or comments, please call me or email me at 913-642-3334 or

Michele “MAC” A. Cole

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