FHA’s Office of Single Family Housing CONFIDENTIAL. PROPRIETARY. INTERNAL USE ONLY Presented by:...

FHA’s Office of Single Family Housing

CONFIDENTIAL. PROPRIETARY. INTERNAL USE ONLY

Presented by:Michael LevineHousing Program Officer, Office of Single Family HousingU.S. Department of Housing and Urban Development

HUD Philadelphia Homeownership Center

Update on FHA Mortgage Programs

Pennsylvania Homes Within Reach ConferenceHarrisburg Hilton

November 17, 2015


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Today’s Presentation

• FHA Loan Affordability: Features that make an FHA loan affordable and a historic vehicle for access to credit.

• FHA Update: What FHA is doing to address three Single Family priorities:

― Expanding Access to Credit― Ensuring Long Term Viability of the Mutual Mortgage

Insurance Fund― Making it Easier to Do Business with FHA


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FHA Affordability: Providing Access to Credit for Many Families and Purposes

Features that make FHA the current choice of many first-time homebuyers and those with special housing needs


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Affordable Features of FHA Loans• Down payment requirement: Only 3.5 percent.

• Government secondary financing or a gift from family or one’s employer can cover 3.5 percent.

• Streamline Refinance opportunity.

• Permit Non-Occupying Co-borrower.

• Competitive interest rate availability.

• Assumable.

• Effective permanent requirement that lenders must help borrowers avoid foreclosure.

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• Purchase and rehabilitate with one low-cost loan.

• Renovation funds are escrowed so work can be done after closing.

• Modernize, add rooms, new heating or roof, energy improvements, or other real property needs.

• Limited 203(k) for non-structural work up to $35,000; no consultant required.

• Loan amount is based on as-rehabilitated value.

203(k) – Purchase or Refinance with Rehabilitation


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• HFA, local government, family, or employer may cover down payment but employer may not restrict employment as a condition.

• Other parties can cover closing costs and POCs, but not included in down payment calculations.

• No combined LTV restriction on purchase with FHA and non-amortizing government second loan.

• Resale restrictions must dissolve upon foreclosure.

Combining FHA with Affordable Seconds or Gifts


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FHA Funds Energy Improvements• 203(k) can fund energy improvements.• Solar, wind, and Energy Efficient Mortgage Improvements can

be financed in standard FHA Purchase or Refinance loans and may increase a base loan above statutory maximums.

• Energy Efficient Homes (EEH) are entitled to higher ratios of debt-to-income in view of presumed utility cost savings.

• Property Improvement (Title I) Program is a stand-alone loan product that can finance energy improvements: – Unlike home equity loans and HELOCs, there are no Loan-to-Value

ratios or credit score restrictions. – No lien is required if the loan is under $7,500.– Maximum loan amount is $25,000 May be up to a 20 year term.


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FHA Single Family Priorities

Working with the industry participants to enhance business processes,

communication, and policy clarity.

Making it Easier to Do Business

Implementing responsible ways of providing first-time homebuyers and

underserved, credit worthy borrowers access to credit to ensure long-term

homeownership success.

Expanding Access to Credit

Balancing our mission with sound lending practices to ensure the health of the Mutual

Mortgage Insurance Fund.

Ensure Long-term Viability of MMI Fund


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Responsibly providing first-time homebuyers and underserved, credit worthy borrowers access to credit to ensure long-term homeownership success through:

• Housing Counseling• Single Family Housing Policy Handbook• Quality Assurance Framework

Expanding Access to Credit


10Source: HUD

Increased Affordability Translates into Increased Access to Credit - ½ Percentage Point Reduction in the Annual MIP Premium…..

1. Based on average loan size of $180,000

Saves $900 annually for an average household.1

Saves $2-$3 billion for these households.

Benefits 2-3 million households over the next 3 years.

Nearly 250,000 additional creditworthy, responsible families will be able to afford to buy over the next 3 years.

1. Based on average loan size of $180,000


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FHA Single Family Purchase & Refinance Loans in Pennsylvania

Standard - 203(b) Reverse (HECM) - 255 Rehabilitation - 203(k)

LoansMortgage Amount Loans

Mortgage Amount Loans

Mortgage Amount

2012 43,707 $7,050,396,676 2,637 $457,795,418 786 $122,102,559

2013 47,402 $7,622,413,331 2,842 $507,458,444 753 $125,207,171

2014 27,030 $3,927,170,484 2,312 $423,533,067 636 $104,689,524

2015 37,175 $5,796,760,509 2,237 $430,381,606 748 $118,139,765


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FHA Purchases and Access to Credit

2010 2011 2012 2013 2014 2015 (on 7/31)

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

Non-FirstFirst

28%

30%

27% 27

%

18%72% 70%

73%

73%

82%

Source: FHA Home Mortgage Insurance Division

FHA Share of Portfolio: First-Time Homebuyers

LAST REVIEWED: 8/28/15


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Housing Counseling and EducationNetworks funded and overseen by HUD.

Enables families underserved by the current mortgage market to achieve sustainable homeownership.

Enables all consumers to make better housing choices.

Prevents foreclosures of defaulted loans.

When provided before purchase, reduces default rates.

Provides value added to mortgage and real estate industries.

Will be promoted in an upcoming FHA marketing campaign for consumers and the Housing industry to raise awareness of the value added and to mainstream usage.


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FHA’s Single Family Housing Policy Handbook (SF Handbook; HUD Handbook 4000.1) is a consolidated, consistent, and comprehensive single source for FHA Single Family Housing Policy:

• Consolidated: Eventually, all SF Mortgagee Letters, Housing Notices, Handbooks, and other policy documents will be consolidated into a single source.

• Consistent: Consistent format and terms throughout the SF Handbook support easier use – a key to FHA’s Access to Credit strategy.

• Comprehensive: The SF Handbook will cover all Single Family Housing policy.

SF Handbook Overview


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Online SF Handbook• Online version of

FHA’s SF Handbook

• Resides on AllRegs® electronic policy platform

• Fully searchable (keyword, etc.)

• Free access to site via link on HUDCLIPS

Access the link on HUDCLIPS at: http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh.


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• Doing Business with FHA section: Includes Title I Lender and Title II mortgagee approval and eligibility requirements, post-approval policies and annual re-certification requirements. Other subsections in progress.

• Origination through Endorsement section: Contains policies and requirements from borrower application, to underwriting and processing, and through to obtaining an FHA insurance endorsement for the majority of FHA Title II forward mortgage products and programs.

• Servicing and Loss Mitigation section: published in June, effective March 14, 2016. Consolidates existing servicing guidance in over 220 handbooks, mortgagee letters and other policy documents. Includes policies on defaults, mitigation, and Servicer Tier Rankings.

• Quality Control, Oversight, and Compliance section: contains policies and requirements for institution and loan level quality control; FHA’s monitoring activities; and actions FHA may take against mortgagees and its employees, and other individuals and program participants.

Key Sections of the Consolidated SF Handbook


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• Doing Business – Other Participants (certain subsections);

• Claims and Disposition;

• Title I;

• Home Equity Conversion Mortgages; and

• Quality Control, Oversight, and Compliance – Other Participants (certain subsections).

SF Housing Policy Handbook: Sections Still to Come

Last Reviewed: 8/19/15


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Quality Assurance Framework

FHA wants to:• Provide clear rules of the road.

• Encourage responsible behavior.

So lenders can:• Originate loans with confidence.

• Focus on the quality of their processes and lend to all qualified borrowers.


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1 The terms “Unacceptable” and “Deficient” refer solely to the code names used by FHA in its previous QA systems and practice and should not be extrapolated to any other context or for any other purpose. Because these terms could be open to a variety of interpretations and do not provide the level of specificity desired by FHA, they are being replaced under the Taxonomy with Tier labels.

Loan Quality Assessment Methodology (Defect Taxonomy)This Taxonomy represents an evolution in FHA’s approach to Quality Assurance.


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Lender Performance Management

Supplemental Performance Metric compares lender performance to an FHA risk mix and default rate.


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Balancing our mission with sound lending practices to ensure the health of the Mutual Mortgage

Insurance Fund.

Ensure Long-term Viability of MMIF


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HECM in Transition: Program Sustainability

Reduce risk to the MMI Fund:Product structure (fixed-rate products/large draws at close); andTaxes and Insurance defaults.

Sustainable solution for the borrower:Ability to meet requirements of the loan; andLong term access to equity to support ability to age in place vs.

use of program as a crisis management tool.

Non-Borrowing Spouses.

Reputation Risk: Marketing and Sales Practices.

Loss Mitigation and Due and Payable Servicing Guidance.


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Working with industry participants to enhance business processes, communication, and policy

clarity.

Making it Easier to Do Business

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Making it Easier to Do Business with FHA• FHA SF Handbook – create a single authoritative source for

FHA Single Family policy.

• Implement broader use of e-Signature policy.

• Business Transformation – implement new capabilities and move some systems to a new technology platform:– Electronic Appraisal Delivery Portal: Improve access to data earlier in the

process to improve risk management and to minimize paper.

– Lender Electronic Assessment Portal: Enable FHA to better identify, mitigate, and manage risk; automate and replace manual processes.

– E-Case Binders – Electronic Appraisal Delivery portal is first step towards a portal enabling lenders to transmit entire case binder to HUD electronically.

– Leverage industry data standards where possible (MISMO, etc.)


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• Phone: Monday-Friday, 8 a.m. to 8 p.m., ET. Toll Free: (800) CALL-FHA or (800) 225-5342

• Email: [email protected]

• www.hud.gov/ answers : 1600+ Qs and As addressing 90% of our phone calls and announcements of policy changes and training opportunities.

• FHA INFO emails: Frequent email notifications of new policies and training opportunities for any one who signs up.

Getting Information About FHA: The FHA Resource Center

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