Tuesday, September 18, 2007

One bird with two stones

Not my wittiest title but the topic is rather dry and it is nearing Beer:30! The mortgage market was highly anticipating the announcement from the feds today that they will lower rates by a .5% hoping "to help forestall some of the adverse effects on the broader economy that might otherwise arise from the disruptions in financial markets and to promote moderate growth over time." Also today hope for FHA Reform as the US House of Representatives passes HR 1852 overwhelmingly by a vote of 348-72. The bill now moves to the U.S. Senate, and if passed will go to the President for signature. Specifically, the bill includes the following important provisions:
Lower Down Payments. Authorizes zero and lower down payment loans for borrowers that can afford mortgage payments, but lack the cash for a required down payment.
Housing Counseling. Authorizes more than double the current funding level for housing counseling, to help subprime homebuyers and borrowers late on mortgage loan payments.
Subprime borrowers. Directs FHA to provide mortgage loans to higher risk (but qualified) borrowers, without authorizing unnecessary fee hikes on such borrowers.
Reverse Mortgages. Enhances the FHA reverse mortgage loan program to help seniors pay for health and other expenses, by removing the loan cap to avoid program shutdowns, raising loan limits, and by reducing the maximum fee lenders can charge for these loans.
Multifamily Loans. Raises FHA multifamily loan limits, so these loans can fully fund construction costs in high cost areas, and enhances sale of foreclosed FHA rental housing loans to localities, so that affordable housing can be maintained in local communities.
Affordable Housing Fund. Authorizes up to $300 million a year from the bill’s excess profits for affordable housing, instead of returning such funds to the General Treasury.
Higher Loan Limits. Adopts the Frank/Miller/Cardoza amendment that would raise FHA single family loan limits, which now bar loans above 95% of the median home price in each local area and shut FHA out of higher cost home markets. The amendment raises the FHA loan limit in each area to the lower of (a) 125% of the local area median home price or (b) 175% of the national GSE conforming loan limit. The amendment also retains the bill’s provision for a nationwide FHA loan floor of 65% of the GSE conforming loan limit, and gives HUD authority to raise these loan limit amounts by up to $100,000 “if market conditions warrant.” In addition, the House adopted an amendment to the bill to direct FHA to make available refinancing loans to existing qualified homeowners who are in default or at risk of default due to rate resets or mortgage market conditions, and to authorize lower down payments for such purpose. The amendment also includes provisions to address problems arising from inflated appraisals.
Click here to read the full press release.