FHA Modernization Act of 2007 passed by the Senate

Today’s news is that the Senate passed the FHA Modernization Act of 2007. Now, this bill will be debated in Congress then review by President Bush for approval.

FHA was created during the Depression to stimulate the housing market at the time when homeownership simply wasn’t a reality for most people, today it looks to aid homeowners who have fallen victims to the subprime crisis.

The FHA Modernization Act of 2007 would:

Cut the FHA insured loan down payment requirement from the current 3% to 1.5% down payment and offer a variety of down payment options
Raise maximum FHA insured loan limit to $417,000 same limit used by Fannie Mae and Freddie Mac loan limits
Simplify Condominium loan requirements
Allow FHA to insure more reverse mortgages by eliminating the cap on the number of these loans that FHA can insure

For now the FHA has the FHASecure program which became available on August 31st, 2007. This could possibly be another way out for some homeowners who acquired subprime ARMs when they purchased their home or refinanced it and are now facing foreclosure.
FHASecure allows homeowners to refinance if they are now in default because of higher mortgage payments because of the interest rate adjustment on their ARM loan.

However, homeowners must have a history of on time payments for at least six months prior to the reset, must also have a non-FHA insured ARM loan which has already reset or is scheduled to reset. Homeowners must also prove to have sufficient income to make the mortgage payments. This requirement may disqualify many homeowners who bought homes beyond their means with “stated income loans”.

You may also be required to have at least 90% equity in your home. This may be automatically disqualify many Californians and San Jose residents who bought homes at the peak of the real estate market with zero down using a combination of “interest only” loans, “negative arm” loans and “Heloc” loans.

The FHA website has a section “FHASecure Frequently Asked Questions for Homeowners” that can answer many questions you may have.

Comments

One Response to “FHA Modernization Act of 2007 passed by the Senate”

John Campbell on December 30th, 2007 9:44 AM

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