There’s a great article on The Hill today about what’s going to happen with FHA modernization following the August recess. It lays out different positions of individuals, possible deals, and roadblocks.

A sticking point is the no-money-down provision. Currently, the FHA insures loans only when the borrower makes a 3 percent down payment. Lobbyists expect a Dodd-Martinez bill to relax the requirement to 1.5 percent “cash down,” in the form of a down payment, closing costs or other expenses. But that might not be enough to appease Shelby, who has voiced skepticism about expanding the FHA, lobbyists said.

It’s nice to see some fresh information and perspectives concering the reforms. I think the 1.5% “cash down” could be an ideal compromise between those who insist on an initial investment and those who think the current 3% minimum is keeping potential homeowners as renters.

Also, it’s worth noting that 2 contenders for the Democratic nomination (Dodd and Clinton) are in on the reforms. Looks like FHA stance may have an impact on the primaries, as Dodd has already made it a big part of his campaign.

Along with the FHA, HUD has many other great programs to help individuals looking to become homeowners. One of these programs is HUD homes. Check out this post on Move – The First Time Home Buyers blog all about HUD homes. The author, Cecilia, points out another great opportunity:

HUD does not offer loans directly, but many HUD homes qualify for FHA loans, which are easier to qualify for than conventional loans. This is due to the fact that the FHA insures the mortgage. There are different types of loans for these homes, such as fixed rate, adjustable rate, and purchase/rehabilitation loans.

Find a great HUD home, use an FHA loan, live happily ever after!

There are a zillion articles out there examining what’s wrong with FHA, what’s right with FHA, what’s changing with FHA, etc., etc., etc.! Most of them mention the mounds of paperwork associated with FHA, but this USA Today article goes a little deeper with the explanation of the current situation.

When a mortgage broker deals with an FHA loan, the process “has to go through two extra hoops and another pile of paperwork,” Gumbinger says. Many private lenders use automated underwriting systems, a tool that FHA is now considering.

While soaring defaults in subprime mortgages have led to an increase in FHA applications, approvals are climbing at a slower pace. It generally takes 90 to 120 days for an FHA loan approval, so some applications are still in the pipeline.

The article also explains why FHA can be more difficult for lenders as well as borrowers when it comes to the red tape – specifically, expensive yearly audits. This article makes it very clear that making FHA relevant again has as much to do with administrative fixes as it does with fixes to the loans.

Yes, I’m reusing this joke. (And by joke I mean replacing the “o” at the end of a state name with “no.” Not all that funny, I guess.) It really does fit quite well though. Anyways, the story is that Idaho foreclosures are up 21 percent. Trouble nationwide.

I revere the New York Times. So naturally every time there is an FHA/subprime/housing market story I feel that it is my obligation to shout it from the rooftops that this situation is getting attention from my favorite source.

Here you are.

As anyone who has scanned the pages of FHABook knows, I am all for FHA modernization. I think it will be a great service to borrowers and make the FHA more relevant in today’s lending market. Here is a column with some opposing views presented by Peter Miller on the Realty Times site.

I do understand Peter’s point that since FHA is currently making a comeback modernization may be unnecessary, however the aspects of FHA that need to be reformed are what allowed subprime to take over in the 90s. Just because subprime is in some hot water right now, doesn’t mean that something else won’t come along and defeat an outdated FHA again. I know we shouldn’t fix something that isn’t broken, but FHA has been broken for awhile and still needs a serious amount of fixing.

These are both kind of “Tell-Me-Something-I-Don’t-Know” stories for those of us who keep up on lending/FHA news. But, just so you can see who is reporting what:

To fully understand the importance of an FHA resurgence in today’s market, one must understand the Subprime Boom and subsequent Bust (which is still happening today). Enter this new book by Edward Gramlich, a former member of the Board of Governors of the Federal Reserve. The book, Subprime Mortgages: America’s Latest Boom and Bust, is a worthy read for anyone wanting to understand today’s market. A decade ago subprime crushed FHA lending and the current subprime troubles are proof that we need the trustworthy FHA to be a force in the market once again.

The book, which is published by the Urban Institute, was the subject of a recent panel discussion on Book TV. Panel members included:

The panel discusses the problems associated with subprime, subprime’s place in the future, and solutions to the daunting issues facing the subprime lending market.

I like when people agree with me, and therefore I like Dave Porter. Dave’s recent post on his site, Mortgage Broker Coaching, about DPAs has renewed my hatred for Nehemiah DPA. More than anything, I strongly dislike Nehemiah because the good folks over there seem to think they can get away with anything by naming their not-for-profit after a Biblical person/book. Nice try.

Check out this post from the Mortgage Cicerone that is chock full of information. It’s got information on DPAs, FHA benefits, and helpful lists with random FHA info and guidelines. Good insight and lots of information crammed in there. Here’s an excerpt:

FHA not only helps people buy a home, but helps them keep it as well. In return for protecting lenders against loss, FHA requires financial institution to offer assistance to borrowers experiencing difficulty making mortgage payments.