# Presentation: 060667

## FHA Business Update

## Slide 2

## Slide 3

## Slide 4

**Notes:**
Application for FHA case number assignment in FY 2007 are up by 7.0 percent year-to-date compared to FY 2006.  255 (HECM)  and 203K applications have increased the most rising by 12 percent each, followed by 203B at 7.0 percent.  The only section showing a year-over-year decline is 234C, falling by over 12.0 percent. The above data was taken from the SFDW.  Data is current as of 8-31-07.  Data is not broken down by soa in the Case Assignments & Endorsements Fiscal Year-to-Year Report.

## Slide 5

## Slide 6

| ENDORSEMENTS |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- |
|   | Actual |   | Actual |   |   |
|   |   |   |   |   |   |
| HOC | FY 2007 |   | FY 2006 |   | Change |
| Philadelphia | 147,092 |  | 129,515 |  | 12% |
| Atlanta | 164,276 |  | 150,788 |  | 8% |
| Denver | 155,334 |  | 160,451 |  | -3% |
| Santa Ana | 65,605 |  | 61,341 |  | 6% |
| Total | 532,307 |   | 502,095 |   | 6% |

**Notes:**
FY 2007 endorsements are up 6.0 percent FYTD compared to FY 2006.  
Philadelphia showed the largest year-over-year gain, with an increase of 12.0 percent in their loan endorsements. 
Denver experienced a 3.0 percent drop in endorsements. 

## Slide 7

| TOP TEN STATES FOR FHA ENDORSEMENTS FYTD 2007 |  |  |  |  |
| --- | --- | --- | --- | --- |
| 2007 Rank | State | FYTD FY 2007 | FYTD FY 2006 | Change |
| 1 | Texas | 53,395 | 61,920 | -16% |
| 2 | Florida | 33,664 | 24,980 | 26% |
| 3 | Georgia | 24,539 | 25,904 | -6% |
| 4 | California | 23,340 | 27,210 | -17% |
| 5 | Ohio | 22,170 | 24,311 | -10% |
| 6 | Michigan | 19,604 | 19,698 | 0% |
| 7 | Illinois | 18,168 | 18,530 | -2% |
| 8 | New York | 17,339 | 17,421 | 0% |
| 9 | Pennsylvania | 16,464 | 15,209 | 8% |
| 10 | North Carolina | 14,587 | 16,702 | -14% |
| Total |   | 243,270 | 251,885 | -4% |

**Notes:**
The above data was taken from the SFDW.  Data is current as of 8-31-07.

## Overall Endorsements FY 2007

|  | % of Business | Number |
| --- | --- | --- |
| Purchase | 52 | 237,713 |
| Refinance | 27 | 123,324 |
| Reverse Mortgage | 21 | 95,370 |

## Refinance Activity

|  | % of Business
FY 2007 | Number 
FY 2007 |
| --- | --- | --- |
| Cash Out | 76 | 94,073 |
| Rate & Term | 8 | 9,086 |
| Streamlined | 16 | 20,165 |

## Lender Insurance 

**Volume**
- 397 lenders
- 262,118 loans
- 68% of forward mortgage business
**Performance (****30/60/90****)**
- LI:  6.64%
- Direct Endorsement:  8.28%

## Policy Updates

**Legislation**
**Refinancing to FHA**
**Risk-based premiums**
**Seller Assisted Downpayment**

## Administration ProposalChanges to the National Housing Act

| Loan Limits | Increases the limit for lower cost areas from 48% to 65% of the GSE conforming loan limit, permitting FHA to insure newly constructed homes.  
Increase the limit for higher cost areas from 87% to 100% of the conforming limit with individual local limits set at the median price of a home in each area.  
Because of FHA’s mortgage limits, borrowers in high cost housing markets who do not qualify for prime mortgages have no option but high cost loans. |
| --- | --- |
| Down Payment | Eliminates FHA’s 3% minimum cash investment requirement and down payment calculation.  FHA borrowers will have a range of options to control the amount of their down payment and mortgage payment considering their immediate and long-term goals. |
| Loan Term | Increases the maximum loan term from 30 years to 40 years. The longer loan term will decrease monthly payments yet build homeowner equity through a fully amortized loan. |
| Mortgage Insurance Premium | Eliminates the 2.25% upfront and .55% annual premium caps allowing FHA to raise or lower the premium to match the borrower’s risk.  The FHA borrower gets a market interest rate loan; the risk is mitigated through the premium.  “High cost loans” offset risk in the interest rate, sometimes 3 to 8 percent above market.  For example, a 3% FHA upfront premium for a $100,000 mortgage is $19 per month. A 3% interest rate increase (6.5% to 9.5%) for the same mortgage is $156 per month.  The difference of $137 would purchase $21,700 more house.  The annual FHA premium charge is eliminated after 5 years and 22% property equity. |
| Condominiums | Revises the definition of mortgage to insure condominiums as a single family unit rather than a multifamily project.  The change would align FHA to industry and streamline processing, potentially reducing condominium costs. |
| Reverse Mortgages | Changes Home Equity Conversion Mortgage HECM) requirements:
Eliminates the FHA cap on the number of loans that can be insured.
Sets a national loan limit at the GSE conforming rate so that all seniors have equal access to their equity regardless of where they live.
Permit seniors to purchase a home and get a HECM in one transaction, so that seniors can easily move to more suitable housing.  Currently borrowers must complete their home purchase transaction and HECM separately, incurring additional costs. |

## Refinancing to FHA

**Provide an alternative to foreclosure**** **
- Break cycle of foreclosure and price depreciation
- Provide lenders another loss mitigation option
- Assist nearly 100,000 borrowers this year
- Assist nearly 160,00 borrower next year

## Refinancing to FHA

**Policy Changes****  **
- Subordinated second liens – applies to all FHA refinances
- Refinance delinquent loans – *FHASecure*

## Refinancing to FHA

**Refinance for Upside-Down Borrowers**
- Subordinated liens
- Short pay-off on existing mortgage
- Re-subordination of existing 2nds
- State and local programs

## Refinancing to FHA

**Subordinate liens**
- Second lien – CLTV may exceed the FHA LTV limit
- Qualifying ratios include second lien payments unless deferred more than 36 months

## Refinancing to FHA 

***FHASecure***
- Extends FHA refinance option to borrowers who are
- Delinquent
- Non-FHA ARM mortgagors
- Facing interest rate reset
- Helps borrowers stay in their home
- Assists nearly 80,000 additional borrowers

## Refinancing to FHA

***FHASecure***** Eligibility**
- Effective immediately through 12/31/08
- Non-FHA ARM that has reset
- Delinquency resulted from reset
- Six months on-time payments prior to reset
- Demonstrated capacity to repay
- SF owner-occupied principal residence

## Refinancing to FHA

***FHASecure***** Mortgage Amount**
- Current FHA geographical maximum mortgage limits apply
- Current FHA maximum loan-to-value apply
- May cover existing first lien, purchase money seconds, closing costs, prepaid expenses, points, late charges, arrearages and other costs

## Refinancing to FHA

***FHASecure***** Lender Responsibilities**
- Encourage borrowers to seek advice on tax consequences of debt write-off
- Ensure accurate property valuations in declining markets
- Refrain from soliciting homeowners to cease making mortgage payments in order to qualify for *FHASecure*

## Risk-Based Premiums

**Benefits**
- Fairer assessment of premiums for borrowers
- More Accept/Approve loans
- Reach borrowers not served today

## Risk-Based Premiums

**Features**
- Purchase loans and fully underwritten refinance loans after 1/1/08
- LTV and credit score
- First-time homeowner who otherwise would pay 225 bps premium may be eligible for a 200 bps premium with homebuyer pre-purchase counseling prior to sales contract

## Risk-Based Premiums

| 
Upfront Mortgage Insurance Premiums
All premiums are specified in basis points (0.01%) |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Minimum Downpayment (%) |  | Decision Credit Score |  |  |  |  |  |  |
|  |  | 850-680 | 679-640 | 639-600 | 599-560 | 559-500 | 499-300 | None |
| 
Funds from a Borrower or a Relative | 10 | 75 | 100 | 125 | 150 | 175 | 175 | 200 |
|  | 5 | 100 | 125 | 150 | 175 | 200 | -- | 225 |
|  | 3 | 125 | 150 | 175 | 200 | 225 | -- | -- |
| Other Sources of Funds | 3 | 175 | 200 | 225 | -- | -- | -- | -- |

## Risk-Based Premiums

**Decision Credit Scores**
- One Borrower
- Three scores:  use middle value
- Two scores: use lower value
- Two or More Borrowers
- Determine each borrower’s score
- Average the scores

## Risk-Based Premiums

**Borrower Eligibility**
- Minimum credit score of 620 if downpayment funds from sources other than borrower or relative
- Minimum downpayment of 5% if no credit score for borrower

## Risk-Based Premiums

**TOTAL Scorecard**
- TOTAL Underwriting
- All borrowers with valid credit scores must be scored by TOTAL
- Accepts will increase approximately 10% or more
- Manual Underwriting
- Refers are charged rate on the premium matrix where they fit
- DE underwriter decides if borrower qualifies for mortgage

## Seller Assisted Downpayment

- October 1, 2007 – Final rule published
- Establishes that a prohibited source of downpayment assistance is a payment that consists, in whole or in part, of funds provided by any of the following parties before, during or after mortgage closing:
- (1) the seller, or any other person or entity that financially benefits from the transaction

## Seller Assisted Downpayment

- (2) any third party or entity that is
- reimbursed directly or indirectly by any of the parties listed in (1)
- Sales contract must be entered into before October 31, 2007
- If Nehemiah is providing a seller-derived gift for downpayment assistance, the sales agreement must have been signed before April 1, 2008

## Real Estate Owned Incentives

- The Atlanta HOC is currently offering a $100 Down payment initiative
- Listings with an effective date October 5, 2007 and thereafter
- $100 down payment is for owner occupants purchasing a HUD Home with FHA financing
- Also available to owner occupant purchasers who obtain a FHA Home Repair loan