Over at the Reverse Mortgage Guide, Peter Miller points out a part of the Housing Rescue Bill that has been largely overlooked: a limit increase and fee reduction on reverse mortgages. Miller points out the changes:

Reverse mortgage borrowers will benefit from a higher loan cap ($625,000)and also by a reduction in allowable lender fees from roughly 2 percent to 1.5 percent. HUD insurance charges remain unchanged.

With so many issues being addressed in this legislation, it certainly is easy for important changes to be overlooked by the general public. Hopefully, this bill hasn’t tackled too many issues…

Thanks to Peter for pointing this out!

The House passed the Housing Rescue Bill, which will affect many aspects of the housing market. So just how exactly does it affect FHA loans? In CNNMoney.com’s account of the bill, the effects on FHA are described as follows:

Increase the Federal Housing Administration’s role. The FHA could insure up to $300 billion in new 30-year fixed rate mortgages for at-risk borrowers in owner-occupied homes if lenders agree to write down loan balances to 90% of the homes’ current appraised value.

Lenders would also agree to pay upfront fees to the FHA equal to 3% of a home’s appraised value. Borrowers must agree to pay an annual premium to the FHA equal to 1.5% of their new loan balance. They must also agree to share with the government any profit they realize from selling or refinancing.

The cost of the new FHA program – which would begin on Oct. 1 and be in place for just a few years – would be funded by fees from Fannie and Freddie.

While the bill authorizes the FHA to insure up to $300 billion in loans, the CBO estimates that the agency is only likely to insure up to $68 billion and help keep roughly 325,000 people in their homes. Those estimates were based on the CBO’s assessment of who is likely to qualify under the program and who is likely to default and lose their home anyway despite being in the program.

Steve Preston, secretary of the Department of Housing and Urban Development, which oversees FHA, called the bill “a mixed bag.” He said in a statement that the measure “ties our hands” by making it impossible for FHA to charge higher rates to riskier borrowers. The bill calls for a 12-month moratorium on so-called risk-based pricing for FHA loans.

“Now, FHA will be required to increase prices on all customers or eliminate its refinancing program for subprime borrowers at a time when they need it the most,” Preston said.

As you can see, the folks over at HUD aren’t exactly thrilled with the bill. This should certainly raise eyebrows.If the people who know FHA best aren’t behind the bill, its ability to truly serve Americans is doubtful.

Another CNNMoney.com article, “How the Housing Bill Can Rescue You,” specifically outlines who can be helped by FHA and what they will need to do to be serviced. Here is a snippet of the eligibility requirements:

Qualified borrowers must live in their homes and have loans that were issued between January 2005 and June 2007. Additionally, they must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.

They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage – and attest that they are not deliberately defaulting just to obtain lower payments.

This program will only be in effect for the next couple years, and hopefully it will do more help to Americans than harm to FHA. There certainly is the potential…

It was reported today that President Bush has reversed his pledge to veto the Housing Bill. According to the New York Times, Secretary of the Treasury Henry Paulson is to credit for Bush’s change of heart:

But Mr. Bush set aside those objections on the advice of the Treasury secretary, Henry M. Paulson Jr., who told him that the overall package was necessary to help stabilize the housing and credit markets, according to the White House press secretary, Dana Perino, who announced the switch Wednesday morning. Ms. Perino said the gravity of the crisis, coupled with Congress’ plans to recess next week, was the reason for the reversal.

There is still a possibility that the bill will be held up in the Senate, but a huge obstacle has just been overcome.

The FHA is out there to help. This week, the second phase of the direct mail campaign the agency has in place will roll out. That means that some 675,000 people who are considered at risk for losing their home will get help from the agency, or at least the offer of help.

The agency will mail out thousands of letters this week to those who are going through foreclosure as well as those who are at risk for doing so, to offer help. The agency has used this method to get people back on track for their loans, and help them to avoid foreclosure. The FHA is offering a method that allows these homeowners to get into better mortgages that are safer to the homeowner (and the lender) as well as helps them to get out of the higher costing mortgages they are currently facing.

A few months ago, the organization provided the same type of help to some 280,000 people. In that batch, from February, was just the first round. They plan to help at least 850,000 homeowners by September of 2008. The letters are part of the organization’s public awareness campaign, which stresses that homeowners have options beyond foreclosure.

There has been quite a bit of talk about foreclosure being the only solution for many struggling homeowners. While many people have selected to cut their losses and run, this is highly risky. Not only do they lose any investment into their homes they have made over the last few years, but they also put themselves in a situation where they may not be able to purchase a home for some time through damaged credit and financial struggle. This FHA program is alerting those homeowners best positioned to stay in their home through new loans.

In a statement about the letters going out, the HUD Secretary Steve Preston had this to say, “This letter might be the most important piece of mail many of these families will receive this year. This information could not only help save their current home, it could help provide them with long-term financial security. This outreach campaign will ensure families are aware of the safe mortgage alternative offered by FHA.”

Who Gets The Help?

The letters being sent by the FHA are a small fraction of the help available, but those receiving the letters should take advantage of them quickly. They are headed out to those who have already faced or are currently facing their first reset of the adjustable rate mortgage they have.

If you are one of the many that will receive this letter, act on it. FHA loans are highly desirable because they are backed by the federal government, are more affordable and they are safe, unlike many of the high risk loans out there that many homeowners are struggling with currently.

At the same time, if you are unable to get the help you need, or are facing a reset of your mortgage interest rate soon, you can still get help, even if you do not receive one of these loans. The FHA is available to anyone in the United States, though there are loan requirements.

If you are interested in finding out if you qualify for FHA loans, take the first step. While the organization cannot help all borrowers, it can help those that are struggling, those getting into loans, and even some of the higher loan amounts (the FHA has been approved to lend to those homes with values up to $729,750 through the end of the year at least.)

For those that get a letter from the FHA, do not make the mistake of tossing it out. It will be the most important letter you receive.

The Boston Herald has a great article about FHA Loans and their increasing popularity. I found the following statistic particularly staggering (and quite encouraging at the same time):

All told, the FHA expects to back nearly $224 billion of mortgages this year – almost quadruple the roughly $60 billion the agency insured in 2007.

Wow!

Throughout this year, the evidence that the housing industry was suffering has been everywhere. Every time you turn around there seems to be another position on the table. A new solution, a new opportunity, a new way to fix the problem…these have all surfaced. Yet, with each one of these new situations there comes the “what if” situations.

On June 9th, the Federal Housing Administration Commissioner Brian Montgomery made a very interesting statement to the National Press Club. He said that there was his agencies just could not handle any more bad loans, which is one offer or opportunity on the table being discussed. He said, “This is a worrisome idea,” CNN reported, “FHA is designed to help stabilize the economy, operating within management, low risk loans. It’s not designed to become the federal lender of last resort, a mega agency to subsidized bad loans.”

These remarks are meant to table the discussion happening in Congress currently. There is legislation on the table that would have FHA backing up an estimated $300 billion worth of worrisome mortgages. This translates into about 2 million loans.

What is your stance? Should the government really back up these troubled loans? Are you one of the people who are struggling and would like that helping hand from the government?

The concerns go much further….

Montgomery went on to list various reasons why this type of scenario would be troublesome, saying that it would weaken the FHA situation badly. In his own words, Montgomery said his agency has been, “hobbled by low loan limits and higher down payment requirements.” He continued adding that his agency, “was priced out of some housing markets.”

Credit and FHA Standards

One aspect of this entire situation that is new is the way FHA is currently looking at their potential borrowers. For the first time in the agency’s 74 years, it is now pricing loans according to the risk level the borrower possesses, which could be risky for some of today’s FHA borrowers.

Doing this is often believed to be worrisome. It implies that those that have high FICO scores would get the lower rate, while those who are more at risk with a lower FICO score would be a higher rate. What is unique about this is that many people jump in here and claim that this would actually hurt the industry, after all, are not the people who need the most help being charged the most?

According to Montgomery, that is not the case. In fact, he said, “Contrary to conventional wisdom, FHA families with lower incomes have higher FICO scores.” He says, “These are hard working American families who live within their means and pay their bills.”

This would imply, then, that FHA is helping those with lower incomes to get into the homes they want because they are better credit risks than those with a bit more income and lower FICO scores.

What About You?

What situation are you in with your FHA loan? Are you hoping that the government offers more programs to help you get out of the loan or into one that is better protected? As a homeowner, you can wait around until the government makes decisions, or you can put the future of your home in your own hands. Various FHA loan programs could be beneficial to you are already available. Many people will qualify for help under the current program offered, which means that you could save your home loan even if you are currently facing trouble now.

I highly recommend that you invest the time into finding an FHA solution for yourself, instead of letting the government battle it out.

As I noted the other day, HOPE NOW, the network created to help prevent foreclosures nationwide, has been increasing its visibility by airing a TV commercial. So imagine my pleasant surprise when I saw this:

Great to see that instead of just existing, HOPE NOW is reaching out to create awareness and service homeowners.

The Senate passed the housing aid bill 63-5 today, signaling a commitment to help homeowners. The bill will allow the FHA to back an additional $300 billion worth of loans. (Whether or not this is a good thing is another post.) The House would still like to see changes to the bill and the president has threatened a veto, so whether or not this will be signed into law remains questionable.

There is a lot of controversy among the American people today about the housing crisis. Walk into any coffee shop or join any financially related blog or forum online and you will quickly find that there are people that are very angry with the foreclosure mess. With the government trying to help so many lenders who have fallen into difficulties with their home mortgages, and FHA guarantees being made for some of the more controversial loans ever, there is a lot to be concerned about.

Some people believe there should be no handouts to those borrowers who took on too much of a home, or did not keep up to date with their mortgages for other reasons. Others believe that extending a helping hand to those in need right now will strengthen the overall housing market and therefore help keep everyone’s house values from plummeting even further. Still others believe this type of correction has been long coming.

Regardless of this, there are plenty of victims out there of loan fraud. It was especially prevalent during the last few years when brokers, everyone, and their brother it seems were contacting home loan holders and encouraging them to refinance. Lower interest rates, better terms, or the ever important “lower monthly payment” are just some of the sales pitches. To the uneducated or those that simply did not know better, these loans seemed like good opportunities and so they refinanced. They got into adjustable rate mortgages they could not pay once they reset.

Avoiding Loan Fraud

No matter whose fault it is or was there are definitely those preying on them. The good news is there are several things you can do to keep yourself from making the wrong decisions about your loan in the future.

• Look into local homeownership education courses, which are available to you through HUD or other approved agencies.
• Find a trusted real estate agent not trying to sell to you but able to help you really understand all of your options. References from other satisfied customers are always beneficial.
• Always have a home inspector that is working for you do your appraisals. Even if the lender has a professional do the work, have an independent organization help you as well. You want to know the true worth of the property
• Do not fall for false statements: the lender has to be as thorough with the information as you ask them to be. Every single piece of paper that is given to you must have your signature only if you fully understand it. Have an attorney, working for you, by your side.

Mortgage fraud and loan fraud are running rampant. Do not put yourself at risk. Be educated and avoid the pitfalls that may come down the line.

In the recent news is a lot of information about the subprime markets, the worries about foreclosure, but if you are current on your mortgage or have less than perfect credit and want to buy a home, where does that leave you?

I admit, the news of late especially with Congress trying to pass a bill to help move the housing market along is interesting and it has consumed some of the headlines. However, let us not forget that we are moving into the largest house buying time of the year: spring and summer. People move much more often in the summer months mainly because the weather is nice and the kids are out of school. If you are considering it, you may be consumed with worry about your less than perfect credit.

The housing market “crash” and the “credit crunch” are worrying plenty of people who want to be in a home. Some are staying in rental opportunities longer now than they would have just a few years ago. That may not be necessary. In fact, there are some outstanding opportunities for people to get into homes right now.

Avoid Subprime

With the fall of the subprime lenders, you will find it more difficult than ever to find a lender willing to loan to someone that has a low credit score. Rightly, so some people with credit scores that are too low will not be able to find any type of lending opportunity even from the FHA. Yet others, who will fall somewhere in the middle may find a lender.

FHA is able to help those with spotty credit scores to get into a home. They offer loans that do help consumers working on improving their credit, with proven income and employment. There is no doubt that you may pay a bit more for a loan this way through some lenders, yet the FHA programs do offer help to those looking for a way to prove themselves.

You will need to prove yourself to the Federal Housing Administration, though. To have approval for an FHA loan, you will need to provide details of your income, back records, paycheck stubs and anything else that can prove that you are a viable applicant. The FHA is not in the business to secure too risky loans, and these checks help to insure that is the case.

Is This New?

You may believe that this is something new that the FHA programs are doing. That is not the case. In fact, the FHA has a strong history of stepping up to the plate whenever there is a housing scare in which lenders are no longer willing to provide as flexible of loans as they used to.

An example of this happened in a recession during the 1980’s when many of the Texan housing markets fell drastically because of the oil situations there. While lenders reigned in their lending abilities or willingness, the FHA stepped right in to help stabilize the industry. In fact, the very foundation of the FHA is that of helping to establish home ownership in the United States (it was created during the Great Depression to help people buy homes.)

I highly recommend if you are in a situation where you have a good income history and can afford a mortgage, but are worried about shaky lenders, to use the FHA to help you get the home you want. You do not have to wait for a better market, especially when a number of opportunities like low priced homes are available. While the FHA cannot help everyone searching for a home with bad credit, it is able to help many that need and deserve an opportunity.