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New 2015 FHA mortgage insurance premiums.

Base Loan Amount LTV Term 2014 Annual MIP 2015 Annual MIP
Below $625,500 Below 95.00% Over 15 Years 1.30% 0.80%
Below $625,500 Above 95.00% Over 15 Years 1.35% 0.85%
Above $625,500 Below 95.00% Over 15 Years 1.50% 1%
Above $625,500 Above 95.00% Over 15 Years 1.55% 1.05%
Below $625,500 Below 90% Below 15 Years 0.45% 0.45%
Below $625,500 Above 90% Below 15 Years 0.70% 0.70%
Above $625,500 Below 90% Below 15 Years 0.70% 0.70%
Above $625,500 Above 90% Below 15 Years 0.95% 0.95%

Announced by the Federal Housing Administration last week, beginning Jan 1, 2014, the maximum FHA loan will be lower in roughly 650 “high cost” counties.

FHA loans, historically used by first time and low-income home buyers, became a staple in the industry in the aftermath of the mortgage market difficulties in 2008. The limits were raised to provide additional lending options in many metropolitan areas and the program was used with great success with the percentage of homes purchased with an FHA loan growing from 4% in 2007 to almost 20% in 2010. Recently, private lending options have begun to return to the market resulting in a slow but steady decline in FHA originations, making up approximately 14-15% of home purchase loans as of July 2012.

The maximum FHA loan limit in high cost areas was $729,650 and is being reduced to $650,000. Based on origination volume, the change should effect less than 1% of FHA mortgage loans, although some areas will likely be effected more than others depending on average home prices.

Despite the rise of additional loan options, the FHA mortgage loan remains one of the best options available for home buyers and existing homeowners with little equity in their property or a down payment of less than 20%. It offers fixed and adjustable rates with terms ranging from 15 to 30 years.

FHA Refinance Programs:

An FHA Refinance is a loan adjustment backed by the government and serviced by a direct lender in the FHA program. No matter your credit score.

There are several categories of mortgages that are insured by the FHA refinance program, including regular refinances (cash-out and no cash-out) and streamline refinances (with or without an appraisal). Let’s look at these in detail.

Regular RefinancesCheck

1. FHA “Cash-Out” Refinances

These are covered at two levels of loan-to-value, 95% and 85%, for all mortgages endorsed on or after October 31, 2005.

a. 95% Loan-to-Value

      • The loan will be no greater than 95% of the appraised value.
      • The property that is security for the refinance must be a one- or two-unit dwelling.
      • The borrower must also have owned and lived in the property as a primary residence for twelve months prior to the loan application.
      • All mortgage payments on the property must have been current over the last twelve months (i.e. no more than 30 days late) and the mortgage is current at the present month.
      • Subordinate financing can stay in effect, but only in line with the FHA-insured first mortgage, no matter the amount of debt or the combined loan-to-value ratio, as long as the homeowner is eligible for scheduled payments on all loans.
      • All co-signers or co-borrowers, if any, must also live in the home on which the refinance applies.

b. 85% Loan-to-Value

      • The loan will be no greater than 85% of the appraised value and the borrower must have owned the property for at least twelve months.
      • The property in question may consist of one, two, three or four separate units.
      • The borrower must live in the property. If the borrower purchased the home less than twelve months before the final application, the mortgage will be determined by using the lesser of the appraised value or by multiplying the original sales price of the home by 85%.
      • Inheritance-based properties will qualify for 85% LTV refinance provided they were acquired within the last twelve months and documented by the lender.

2. FHA “No Cash-Out Refinances” (non-streamlined)

Use the lesser of the two values calculated below to determine the maximum value of the mortgage:

      • The maximum loan-to-value percentage, multiplied by the appraised value, exclusive of closing costs.
      • The sum of the current first lien, any purchase money second mortgage and/or any junior liens over twelve months old, closing costs, prepaid expenses, accrued late charges, escrow shortages, borrower paid repairs required by the appraisal, discount points, and other fees according to the relevant HUD Home Ownership Center (HOC), MINUS any refund of UFMIP.

Prepaid expenses may include: per-diem interest to the end of the month on the new loan; hazard or flood insurance premiums; and mortgage insurance premiums and property tax deposits needed to establish the escrow account.

The existing first lien may include the interest charged by the servicing lender in cases where the payoff is not received by the first of the month. However, the lien may not include any delinquent interest.

FHA Streamline Refinances

Loans in this category involve no cash back to the borrower (unless there are minor adjustments at closing that do not exceed $500). Streamline refinances are intended to lower the monthly principal and interest on an FHA-insured first mortgage, regardless of whether the home has an appraisal.

A streamline refinance requires a checking of the Limited Denial of Participation (LDP) and General Services Administration Debarment (GSA) lists, but not of the Credit Alert Interactive Voice Response System (CAIVRS).

With the exception of lead-based paint, repairs are not mandated by the FHA on streamline refinance transactions, but they can be mandated by the lender, in which case the borrower must pay for the repairs out of pocket.

1. FHA Streamline Refinance with an Appraisal

Use the lesser of the two values calculated below to determine the maximum insurable value of the mortgage:

      • The maximum loan-to-value percentage, multiplied by the appraised value, exclusive of closing costs.
      • The sum of the existing FHA-insured first lien, closing costs, accrued late charges, escrow shortages, reasonable discount points and pre-paid expenses necessary to establish the escrow account, MINUS any refund of up-front MIP.

The existing first lien may include the interest charged by the servicing lender in cases where the payoff is not received by the first of the month. However, it may not include any delinquent interest.

2. FHA Streamline Refinance without an Appraisal

The lesser of the two values calculated below is  the maximum insurable value of the mortgage:

      • The Original Loan Amount: the original principal balance of the current FHA-insured mortgage, as well as up-front MIP and the new UFMIP being charged on the refinance.
      • Existing Debt: this is the sum of the existing FHA-insured first lien, closing costs, accrued late charges, escrow shortages, reasonable discount points and pre-paid expenses necessary to establish the escrow account, MINUS any refund of UFMIP plus the new UFMIP.

The existing first lien may include the interest charged by the servicing lender in cases where the payoff is not received by the first of the month. However, it may not include any delinquent interest.

Only homes that are owner-occupied are valid for the mortgage calculation above. Although there are investment properties that may have been acquired as principal residences initially, the current borrowers can only streamline refinance these properties without an appraisal for the outstanding principal balance. The mortgage term will be 30 years or the remaining term plus 12 years — whichever is lower.

Streamline refinances on insured mortgages have been allowed since the 1980s. The term “streamline” does not imply a cost-free transaction; it refers to the underwriting and documentation for which the lender is responsible.

A streamline refinance should meet the following requirements:

      • The mortgage is current, not delinquent, and is already insured by the FHA
      • The borrower’s monthly principal and interest payments will be reduced by the refinance
      • No cash can be taken out on the mortgage.

In some cases, lenders will offer “no cost” refinances (meaning the borrower doesn’t incur any out-of-pocket expenses) in which the new loan is charged a higher interest rate than it would if the borrower paid for the costs of closing. In other cases where the property has enough equity, lenders will include closing costs into the new mortgage amount.

A streamline refinance can be done with or without an appraisal. In the case of an investment property, an appraisal cannot be used to determine the refinance amount.

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FHA refinance program is saving homeowners thousands each year.

With so many responsible homeowners upside down or underwater, the FHA refinance program may be the best and possibly the only option available. Homeowners refinancing mortgages insured by the Federal Housing Administration (FHA) are finding they will save thousands per year. A series of administrative reforms are streamlining the process, and under the Obama Administration more homeowners are able to refinance cutting losses now.

FHA Lifeline

In March, Acting FHA Commissioner Carol Galante introduced a new regulation that will “benefit millions of borrowers” through another “streamlined refinancing” option. The FHA lowered the Upfront Mortgage Insurance Premium to .01 percent and reduced annual premiums to .55 percent for borrowers. The original FHA loan must have been endorsed before May 2009.

“This is one way that the FHA can make a real difference to help homeowners who are doing the right thing, paying their bills on time and want to take advantage of today’s low interest rates,” said Galante. “By significantly reducing costs for these borrowers, we can make certain they cut their monthly mortgage burden which will benefit the housing market and the broader economy in the process.”

There are about 3.4 million households that qualify, and they are currently paying up to 5 percent annual interest on their existing FHA loans. On average, FHA refinancing means these homeowners will save $3000 a year — $250 per month.

Offered since the 1980s, FHA streamlined refinancing has become very common. More recent FHA reforms have benefited lenders and homeowners by requiring less documentation — less cost for both. The goal is to lower monthly payments with current low interest rates and enable homeowners to lock in a lower fixed rate FHA mortgages.

Read More »

FHA Mortgage

The FHA home purchase program has many benefits and protections that homebuyers get that can’t be found elsewhere:

  • Lenders may offer you loan terms to make it easier for you to qualifyHappy Homeowners
  • If you’ve had credit problems, even filed bankruptcy, you can still qualify for an FHA loan
  • You’ll pay a low down payment, under 3% of the mortgage, and unlike other loan programs, it can be from a gift from a family member, employer or charitable organization
  • Low costs with competitive interest rates, since the loan is insured by the federal government
  • You’ll have the assurance that you can stay in your home. The FHA has protected consumers since 1934 and provides many options to help homeowners avoid foreclosure.

Read More »

For every mortgage transaction, the lender is responsible for the estimation of the FHA Settlement Requirements to arrive at the cash amount needed for closing. At settlement, the borrower provide this amount, which also includes the following expenses:

Closing Costs – FHA Settlement Requirements

These include the appraisal fee, inspection fees, loan origination fee, the cost of the credit report, settlement fee, deposit verification fees, and other non-recurring costs approved by the FHA.

FHA Settlement Requirements- Prepaid Items

Read More »

FHA Streamline

A FHA streamline refinance is intended to lower the monthly principal and interest on an FHA insured first mortgage with no cash back to the borrower, unless there are minor adjustments (less than $250) at closing. This kind of refinance can come with or without appraisal; if no appraisal is performed, Form HUD 92564-VC is required.

Read More »

Adjustments to the Home Affordable Modification Program (HAMP) and programs run by the Federal Housing Administration (FHA) have been put in place to give added relief and assistance to responsible homeowners.

These modifications are intended to give mortgage servicers and originators more flexibility to work with homeowners who are unemployed due to the weak economy, and with those whose mortgage payments exceed their home’s value because of sharp drops in housing markets.

The $50 billion in federal funding for the program changes comes from the Troubled Asset Relief Program (TARP), while the private sector will also share the costs. As many as 4 million homeowners may be helped by these changes, effective until December 2012. Read More »

Are you current on your mortgage but owe more than your home is worth? A FHA Short Refinance could be a viable option for you and your mortgage servicer.

The purpose of FHA Short Refinance is simple: allow hardworking homeowners to refinance into FHA-insured mortgages that are sustainable and affordable.

When your current lender consents to refinance, you will have the amount owed on your first mortgage readjusted at or less than 97.75% of your current home value. Read More »

The President announced today that a drop in FHA mortgage insurance premiums will be completed by the end of the month. Analysts are predicting a drop of .5% in annual mortgage insurance premiums. The current FHA mortgage insurance premium(MIP) varies by term, loan to value, and amount. For example on a loan term of less than 15 years with a loan to value less than 95% on loan less than $625,000 the annual MIP would be 1.30% of the owed amount on the mortgage. Below are the current FHA MIP rates prior to the Presidents announced change.

Current 2014-2015 Annual Mortgage Insurance Premiums

Base Loan Amount LTV Term Annual MIP
Below $625,500 Below 95.00% Over 15 Years 1.30%
Below $625,500 Above 95.00% Over 15 Years 1.35%
Above $625,500 Below 95.00% Over 15 Years 1.50%
Above $625,500 Above 95.00% Over 15 Years 1.55%
Any Loan Amount Below 78.00% Below 15 Years 0.45%
Below $625,500 Below 90% Below 15 Years 0.45%
Below $625,500 Above 90% Below 15 Years 0.70%
Above $625,500 Below 90% Below 15 Years 0.70%
Above $625,500 Above 90% Below 15 Years 0.95%

Building a solid FHA Program through responsible homeowner refinancing

In this slow but steady economic recovery, the Federal Housing Administration (FHA) wants to separate facts from fiction and say they have acted aggressively to strengthen and protect the mortgage insurance fund putting the FHA program on a sustainable path. As a result of the housing market crash, the FHA’s Mutual Mortgage Insurance Fund suffered in 2008 and 2009.

FHA mortgage insurance protects lenders against losses. Loan programs have specific standards based on the buyer’s ability to pay. All programs are fully funded by mortgage insurance premiums.

Responsible homeowners seeking refinancing are benefiting from the FHA’s recent changes. The FHA reforms are not giveaways; they are in fact, a practical and fiscally prudent approach to avoid defaults. Foreclosures cost the FHA. With refinancing at the current lower rates homeowners can stay in their homes and more easily afford monthly payments. This is due to the FHA’s efforts and the decades long commitment to maintaining housing market health.

“This Administration has acted,” says Carol Galante FHA Commissioner. “Multiple independent analyses show that we are moving in the right direction and that the outlook for FHA and the (insurance) fund is much better than it was in 2009.”

Recognizing criticism from lenders, borrowers, and taxpayers — Galante welcomes “robust and healthy discussion.” In an effort to explain to the public and finance professionals the FHA posted a “myths and facts” Web page. Galante wants the discussion to continue, but the dialog must “start at the beginning” in late 2008.

Immediately prior to the Obama Administration taking office, FHA’s portfolio was beginning to experience significant stress as a result of economic conditions and a large volume of loans supported by seller-funded down payments,” according to Galante. “When home prices fell and the recession deepened, these books began to default and claim at record rates. This Administration acted quickly and aggressively to avoid repeating those mistakes and to mitigate their effect on the (insurance) fund.

The key to these reforms is strict oversight of lender compliance. In February, the federal government and several state attorneys general reached an agreement with the five largest mortgage lenders. The agreement provides $25 billion in “homeowner protections” averting foreclosures due to “abuses” in loan services and foreclosures. Also, the FHA insurance fund is being compensated $900 million.

Galante promises continuing “aggressive enforcement” while continuing efforts to “clarify the rules of the road.” One point being made clear to lenders is that improper loans or foreclosures will require compensation to the FHA.

The Obama administration calls the housing crisis “the single largest drag on the recovery,” and has been working on refinancing reform to assure protection of the insurance fund.

During a February weekly address President Obama outlined, in broad terms, his direction for the FHA. “Right now, there are more than 10 million homeowners in this country who, because of a decline in home prices that is no fault of their own, owe more on their mortgages than their homes are worth.” He said, “That’s why we launched a plan a couple years ago that’s helped nearly one million responsible homeowners refinance their mortgages and save an average of $300 on their payments each month.”

Early reforms continue to help struggling homeowners take advantage of lower rates. There is also other pending legislation that will expand and simplify refinancing programs. First is the Responsible Homeowners Refinancing Act. Then there is the Expanding Refinancing Opportunities Act. Both bills are awaiting committee reviews in the Senate.

The FHA is required to have a 2 percent ratio to insured mortgage liability in the insurance fund. With the housing crash those reserves dipped to 0.24 percent sparking concern and fears of taxpayer funded bailouts. With strict standards for lenders and refinancing reform, the picture is quickly improving. The emphasis on supporting responsible homeowners with strong credit ratings has bolstered solvency. While overall FHA applications increased by 6 percent, the Streamlined Refinance Program increased by 225 percent. This shift to solid mortgages puts the FHA on a sounder footing.

The historic role of HUD has proven once again to be critical. By tactically adapting to the recession, protecting responsible homeowners, and enforcing regulations HUD remains in the black.

The policy of creating more refinancing opportunities for homeowners has proven itself. By refinancing at today’s lower rates, homeowners become part of our continuing economic recovery and build a stronger housing market — HUD’s most critical mission.

What FHA refinance fees are required at settlement?

For the estimation of settlement requirements, your FHA refinance lender will provide a Good Faith Estimate (GFE) as well as any revised forms, and a HUD-1 Settlement Statement for determining the FHA refinance fees and cash amount needed for closing.

 

FHA Costs

The borrower will provide at settlement a minimum FHA refinance down payment, plus additional expenses that may include: closing costs, prepaid items, discount points, an upfront mortgage insurance premium (UFMIP), repairs and improvements, and broker fees.

The cash amount the FHA borrower pays at closing is generally the difference between the total cost of the property and the mortgage amount (not counting UFMIP).

 

Origination Fee for an FHA Refinance.

The borrower may be required by the FHA refinance lender to pay an origination fee in order to close. There is no limit to the fee for FHA mortgage insurance programs, although limits do apply to HECM and 203(k) mortgages. Moreover, borrowers cannot be charged tax service fees at settlement.

Per diem interest is calculated for a minimum of 15 days as part of the GFE to determine the prepaid items collected at closing.

Any discount points the borrower pays will become part of the required cash amount for closing. These discount points cannot be used to meet the minimum downpayment.

Separate personal property items paid for by the borrower, those that do not count as realty, will be included in the cash requirements of the mortgage. Repair and improvement costs that are not financed into the mortgage will also be made part of the cash requirements. UFMIP amounts in cash are also added to the cash settlement total and will be completely financed into the mortgage (for all amounts $1.00 or greater).

Real estate fees that a borrower pays to a broker must be included as part of the total settlement requirements.

FHA Refinance lender paid fees.

In some cases, the borrower’s closing costs and prepaid items may be paid by the FHA Refinance lender via premium pricing. However, these cannot be used to cover any part of the borrower’s downpayment amount. Rather, they must go towards reducing the mortgage principal, provided a specific amount for closing costs and prepaid items has been agreed to.

New adjustments to Federal Housing Administration (FHA) programs will allow hard-working homeowners to have access to more refinancing options. If you are a homeowner who owes a sum that’s greater in value than your home, you may qualify for the new FHA refinance program.

The goal of these changes is to give homeowners a greater opportunity to restructure and refinance their qualifying mortgage loans. This can be done if the borrower is up-to-date on the mortgage and the lender enacts a 10% reduction of the amount owed on the original loan.

Also, the new FHA loan must have a lower balance than the home’s current value, and the borrower’s total mortgage debt after refinancing must be less than 115% of current home value. (This debt would include all mortgages in the homeowner’s name, whether one or multiple.)

Homeowners with troubled mortgages can now lessen Read More »

Today Congress passed a bill today to return FHA loan limits to 125% of local area median home prices. The FHA can now back mortgages up to $729,750 in certain areas in the United States. These new loan limits have been extended until 2013 in hopes to stimulate the housing market.

Fannie Mae and Freddie Mac loan limits were not increased and remain at 115% of local area median home prices, not to exceed $625,500.

Any property that the borrower does not occupy either as a principal residence or secondary residence is considered an fha investment property. Private investors, including certain non-profit organizations, can obtain an FHA-insured mortgage, provided they are approved by the appropriate Housing Opportunities Commission (HOC) and fit one of the following scenarios:

  • The purchase of HUD Real Estate Owned (REO) properties
  • Streamline refinancing without appraisals

Individual investors can take up mortgages made on FHA investment properties if they qualify on credit.

Adjustable-rate mortgages (ARMs) and graduated payment mortgages (GPMs) are not allowed on these properties.

The FHA does not insure loans that are made in the name of a corporation, business partnership, sole proprietorship or trust. (Streamline refinances for mortgages originally insured in the name of businesses are the exception.)

An analysis for credit risk must be undertaken on one or more individuals together with the business entity or trust. The name of each individual plus the business entity or trust must be on the mortgage note. These parties may also appear on the property deed or title, in which case they must also be on the security instrument (the mortgage, security deed or deed or trust).

 
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