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07 Aug 09 FHA Having Trouble Insuring Reverse Mortgages

The increase in FHA funding authority means the government is following the marketplace. FHA mortgages now represent some 35% of all new financing, up from about 5% just a few years ago when the program was crowded out of the marketplace by bad credit loans. It would be counterproductive to restrict the program when FHA loans enjoy great public confidence, especially FHA loans for borrowers with poor credit. In this economy we need home buyers, reason enough to encourage people to enter the marketplace.

Reverse Mortgages: what HUD calls home equity conversion mortgages (HECMs) — those reverse mortgage loans remain attractive for many senior borrowers, but have become troublesome for HUD to insure because of falling home values. While HUD asked Congress for $800 million to subsidize the reverse mortgage program this year, Congress in this bill is saying forget it. Instead of more money, the bill requires HUD “to ensure that the program operates at a net zero subsidy rate.” Given that reverse mortgage are amazingly risky to insure in a slow market what can HUD do to meet the net zero requirement? It can cut back on the number of reverse mortgages it’s willing to insure, it can reduce the maximum amount it will cover, or both. The bottom line: If you want an FHA-insured reverse home loan it might be best to get one before October 1st, the start of the new fiscal year.  Read the rest of the article at FHA Loan Pros.

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13 Apr 09 HUD Warns FHA Lenders in Mortgagee Letter

The Dept. of Housing and Urban Development recently released an important FHA Mortgagee Letter that is important for all mortgage brokers, lenders and finance companies that would like to continue originating FHA loans in their future.  In an effort to protect the public trust and the FHA Insurance Fund, HUD has vowed to ensure that mortgagees are accountable for their home loan origination practices. FHA expects each mortgagee to exercise the same level of care in originating, underwriting and servicing an insured FHA mortgage as it would for a loan in which the mortgagee would be entirely dependent on the property as security to protect its investment.   

When a mortgagee fails to comply with HUD’s policies and procedures, HUD will take the appropriate action.  For example, FHA mortgage brokers or lending companies that materially violate FHA program statutes, regulations and handbook requirements may be referred to the Mortgagee Review Board for appropriate sanctions, which may include termination of mortgagee approval.  For a mortgage broker in 2009, losing a FHA license would be like a barber have their scissors revoked.  It seems that brokers may start following the rules.

Read the original finance article from Jason Cardiff tips online > HUD Updates FHA Mortgage Letter and Cracks Down on Lenders. For more questions, you can go online to HUD.gov or for additional FHA resources, please call 1-800-CALL-FHA.

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