Written By: Bonnie Wilt-Hild, Op-Ed Writer
It’s here all, the Hope for Homeownership program. Mortgagee letter 2008-29 issued October 1, 2008 has set forth all of the guidance that we as lenders need in order to successfully administer this program. Please do not confuse it as an extension to FHA Secure because it is definitely not.
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This program is quite different in more than a few respects, both from an origination standpoint and servicing standpoint. From appraisal age being reduced to 3 months to closing characteristics including additional security instruments, I strongly recommend that everyone deciding to participate fully understand program requirements before administering the program.
The program highlights are as follows:
1. The program is designed for borrowers at risk of foreclosure and provides the borrower the ability to refinance into a 30 year fixed rate mortgage that will be insured by FHA at a more affordable interest rate.
2. The program begins October 1, 2008 and ends September 30, 2011.
3. In order to be eligible the home in jeopardy must be the borrower’s primary residence and the borrower may have no other ownership interest in any other property, the current mortgage must have been originated prior to January 1, 2008 and the borrower has made at least 6 payments. The borrower is unable to pay their current mortgage. As of 03/01/08 the borrowers total PITI was greater then 31% and the borrower can provide documentation to demonstrate so and the borrower certifies that they have not been convicted of mortgage fraud in the most recent 10 years.
4. Maximum LTV 90% and the new mortgage will eliminate all current mortgage debt on the borrowers.
5. Origination, processing and underwriting requirements are different including additional disclosure regarding the borrower which must be provided at least 1 day prior to initial loan application as well as shortened life of property appraisal to 3 months.
6. Borrower validation in FHA connection will include evidence that the borrower has not been convicted of fraud within the most recent 10 years and determine that the borrower owns no other real estate.
7. Only 1 unit properties are eligible including Condo’s and manufactured homes.
8. Only 30 year terms are available and the UFMIP is 3.00% and monthly MI is 1.5%.
9. Standard FHA closing costs policy remains in affect however the maximum fee charged by the lender is 1% origination fee. No additional fees are permitted.
Underwriting guidelines are significantly different including trail modifications should borrowers ratio’s exceed 31/43 but not exceed 38/50. Underwriters read the mortgagee letter carefully, as I said requirements are significantly different. Underwriters will also be responsible for executing additional certification which can be found attached to the mortgagee letter.
Closers and post closers also need to be aware of changes where security instruments are concerned for this program. Additional security instruments are required as are further instructions which can be found in Mortgagee Letter 2008-30 for closers as well as program servicing. As always happy underwriting.
Need FHA Training? CLICK HERE: http://www.FHA-Classes.org
About The Author
Bonnie Wilt-Hild - As an op-ed writer, Bonnie holds mortgage underwriting position as the Senior FHA DE Underwriter for a major lending institution. With over 25+ years of senior-level FHA/VA Government underwriting experience, Bonnie is considered the "Queen of FHA Loans".