Freddie Mac announced Tuesday morning that it will not purchase mortgage loans in the state of New York that fall under the state’s new definition of “subprime”.

“The state of New York has enacted legislation that creates a ’subprime home loan’ category of mortgages,” wrote vice president of customer outreach Patricia McClung in a memo to sellers and servicers. “Freddie Mac will not purchase New York mortgages with note dates on or after September 1, 2008 that fall within the law’s definition of ’subprime home loans.’”

What does this mean to home borrowers?
“Lenders will just decide to stop lending in certain areas,” said one source, a banking executive that asked not to be named. “We could end up with an entire class of borrowers that I call ‘the unlendables.’”

This exemplifies the position that conventional home lenders are taking. They are tightening their belts on lending practices to the point where it’s getting to be nearly impossible to qualify for a home loan. Fortunately, however, the FHA has stepped up to the plate. Under the Housing and Economic Recovery Act of 2008, just recently signed by President Bush, the FHA is being modernized to help with new home purchases and bring hope to those facing foreclosure.

The FHA Modernization Act of 2008 raises the FHA conforming loan limit. The current loan limit is $362,790. Under the new legislation it will be raised to $417,000 in certain parts of the country. In less expensive markets, the limit would be raised from 48 percent to 65 percent of the conforming loan limit, or an increase in the ceiling from $200,160 to $271,050 under the bill. It also does away with seller-funded down payment assistance programs like AmeriDream. But, since many lenders have already done away with these programs, it’s inconsequential. And, you can still get down payment assistance from family, friends, employers, churches and city-,county- and state-funded down payment assistance programs.

HOPE for Homeowners Act of 2008 was put in place to bring hope to those facing foreclosure due to skyrocketing mortgage payments as a result of subprime adjustable mortgage rates resetting to record high levels. This program allows these people to refinance into a fixed-rate FHA loan.

FHASecure is not part of the new legislation. It was put in place earlier this year to address the rising foreclosure rate. It allows people facing foreclosure to refinance their mortgage loans into FHA fixed rate mortgages. This program is due to expire on December 31, 2008. The new HOPE for homeowners act will pick up where FHASecure leaves off.

Even if you’re not facing foreclosure, you can still refinance your home through FHA–just not through the HOPE for Homeowners or FHASecure programs. Fill out the free loan quote on this page or call us at 800-606-5143 to find out if you qualify for a FHA loan.

The Federal Housing Administration (FHA) has been around since June 27, 1934. It was folded under the Department of Housing and Urban Development (HUD) umbrella in 1965. FHA mortgage loans began to lose steam in the late 1990s, when home values started increasing because home prices were exceeding the FHA loan limits. Sellers also didn’t like working with buyers using FHA loans because of the FHA’s stringent appraisal guidelines. With the recent housing turmoil and home prices tumbling in excess of 30% in some areas, FHA has made a comeback.

A housing stimulus was passed earlier this year that temporarily set the FHA and conforming Fannie Mae/Freddie Mac (FNMA/FHLMC) loan limits to the lesser of $729,750 or 125% of an area’s median home sales price. If 125% of an area’s median home sales price is below the current conforming loan limit of $417,000 the current limit still applies. The higher loan limits allow first time home buyers with limited down payment resources, and possibly not so perfect credit, get a FHA loan in higher-priced areas like California and Arizona. Remember, the credit requirements for FHA loans are not as stringent as those for conventional loans. These higher loan limits expire on December 31, 2008, so now is the time to take action. The loan limits lower to a maximum of $625,500 (115% of an area’s median home sales price) on January 1, 2009, when the new housing law loan limits take effect.

With the passage of the Housing and Economic Recovery Act of 2008 (the new housing law) on July 30, 2008, the first time homebuyer benefits even more through a tax credit worth as much a $7,500. The credit isn’t a grant, but rather an interest-free loan that must be paid back to the government over the course of 15 years. If the property is sold for more than the original purchase, and the tax credit hasn’t been fully repaid, the borrower must pay back the balance out of the proceeds of the sale. To get the tax credit, you must buy before July 1, 2009.

James Glassman, a senior economist at JPMorgan Chase, says the tax credit is unlikely to increase demand from first-time home buyers all by itself. But when coupled with other factors–such as falling home prices–”it’s just one more thing that helps,” Glassman says. Add the benefit of low rate home purchase loans using FHA, and it could get first time buyers who are sitting on the fence trying to decide if the time is right to purchase a home to take action and become a homeowner.

Are you a first-time homebuyer? We can help you take advantage of the provisions under the new housing law and newly modernized FHA with its higher loan limits. Just fill out the free loan quote form on the right side of this page, and a lender will get with you promptly. Or, call
800-606-5143.

If there is one good program our government started its the FHA mortgage loan.  This loan program was created in 1934 to help ensure equality for home financing. The Housing of Urban Development belived that everyone deserved the right to own a home and the FHA loan program that spun out of HUD has done exactly that. 

When mortgage financing collapsed the end of 2006 and early 2007, FHA was their to pick up the pieces for homeowners.  Today thousands of people are loosing their homes in foreclosure, but FHA has been the shining star that has actually helped people save their homes.  The FHA Secure has helped thousands of homeowners refinance into a fixed rate mortgage and save their homes at the same time.  Let;s all make a toast to HUD and FHA…Thank You!

In a recent article, Carol Marshall reviews the latest FHA loan programs created to help homeowners stay in their houses with prevention measures against home loan defaults.  HUD secretary Steve Preston has been on the job as the Secretary for HUD for a month. Preston made his announcement in Detroit, which he called “the epicenter of the foreclosure crisis,” for his 1st significant address as HUD secretary to announce an aggressive foreclosure prevention assistance program.  Under the program, HUD would enter a joint venture partnership to buy bad loans from lenders, Preston said at a July 9 Detroit Economic Club meeting. The new loan program will begin in Detroit, one of the country’s hardest-hit foreclosure markets. “Traditionally, when all FHA loss mitigation measures have been exhausted, mortgage lenders foreclose and then submit a claim to FHA,” Preston said. “Under this program, we will create a means for lenders to sell their non-performing mortgages before foreclosure to HUD and a joint venture partner.”   FHA is trying to prevent  foreclosure losses and may assist the troubled housing market stabilize, he said, at a time when the market remains on the brink of future disaster.

Experts estimate as many as 2.5 million foreclosure filings this year, Preston said, compared to 1.5 million in 2007. The average is 650,000. Housing prices are down between 4 % and 17 % nationwide. At the same time, lenders have pulled back from originating loans, which are at their lowest levels since 2000-2001.  In Oakland, Wayne, Macomb, Livingston and Washtenaw counties, there are some 40,000 houses on the market now, representing a 17-month supply, well above the national average of 9.6 months. A six-month supply is considered normal, Preston said.  ‘This is tough on families, very tough,” Preston said.  In some parts of the country, the market was impacted by the housing bubble. But in Michigan, fundamental economic challenges prevail.

“Sub-prime lending is not in and of itself a bad thing,” Preston said. “It has been the path to home ownership for very responsible people. But irresponsible behavior has led to a dangerous proliferation in the market.”  There is $1.3 trillion in outstanding subprime loans - about 12% of the market, but more than half of the foreclosures.  Non-prime avariable rate mortgage loans represent 6% of outstanding home loans, but more than 40% of foreclosures, with more than 1 in 4 of those home loans currently more than ninety days past due or in foreclosure.

Unfortunately, the worst may be yet to come.  “We have another $150 billion in subprime ARMs resetting in the next 18 months,” Preston said. “We’re right in the middle of that reset period of time. We have to understand that we will continue to be flooded with a need to work out these loans.”  That’s where the government has been at the center of the solution, Preston said. Government supported lending is essentially the only source for non-jumbo loans.  FHA home loans, Fannie Mae, Freddie Mac and the Federal Home Loan Bank have absorbed the retreat of the private sector, he said.  But HUD needs to protect itself as well, Preston said. So the department is pushing to institute risk-based pricing on FHA mortgage insurance. “FHA will price the insurance premiums for borrowers according to their credit risk,” he said. “Today the typical borrower pays 1.5 points …. Riskier borrowers will pay 2.25.”  He disputed critics’ claims that risk-based pricing hurts low-income borrowers.  “The facts show the opposite. Risk-based premium pricing will actually benefit lower-income borrowers. Contrary to conventional wisdom, FHA families with lower incomes actually have higher FICO (credit) scores. They are hard-working people who live within their means and pay their bills,” he said.

FHA has taken some measures already to try to stem the tide of the foreclosure crisis - temporarily eliminating the 90-day requirement for buyers to hold a property before selling; increasing FHA home loan limits to as high as $729,000 in some areas of the country.  The recent alliance with HOPE NOW, an organization that offers aid and advice to distressed homeowners has proven to be a wise move.  Hope connects these borrowers with mortgage lenders in an effort to revise their existing mortgages to allow homeowners to remain in their properties at an interest rate they can afford while establishing effective housing counseling programs.

In a recent article published by the Star Tribune, H.J. Cummins raises some interesting home loan points.  Cummins assets that income alone “does not explain why minority borrowers got a disproportionate number of sub-prime home loans in the run-up to the current foreclosure crisis.”.  That study also ranked cities by the home loan disparities between white borrowers and those from racial and ethnic minorities. Only Milwaukee gave a worse sindication than the Minneapolis metro area, based on data concluded in 2006.  The 2007 and 2008 data in not available yet.  This data was gathered and collected under the federal Home Mortgage Disclosure Act (HMDA).

John Taylor who is the head of the National Community Reinvestment Coalition said “The financing data reminds us that the current housing crisis was overwhelmingly the result of the explosion of bad loan products in financially vulnerable communities.” However it should be noted that the the study did not consider credit scores or loan payment delinquencies.  FHA home loans are the most popular financing tool used today for buying or refinancing a home and they do not use credit scores into the underwriting score card.  

In the Minneapolis area, middle- and upper-income blacks were three times more likely than comparably paid whites to get loans that carry more expensive terms designed for high-risk borrowers called sub-prime or “Alt-A” home mortgage loans. Middle and upper-income Hispanics were 2.4 times more likely; Asians, 1.6 times.

Dave Snyder, a community organizer at Jewish Community Action in St. Paul was not surprised by the financing data revealead. “It’s not a statistic that stands in isolation,” Snyder said. He continued by noting that Minnesota has one our country’s lowest homeownership rates for black people, and one of the highest for white people.

Home loan defaults rose nearly 14%  in the last quarter from the previous quarter, research group RealtyTrac said Friday in a sign of deepening housing woes. According to RealtyTrac, on a yearly basis, home loan defaults and foreclosure filings increased 121%  from the same period in 2007.  Home loan defaults  have rose to their worst levels in decades as the housing crisis continues with soaring ebergy costs and dropping property values.  To make matters worse, unemployment and inflation continue ot rise.  Many homeowners continue report increased difficulties to refinance their adjustable rate mortgages into a lower fixed rate payment that works with their shrinking budgets. 

RealtyTrac said that foreclosure filings were reported on 739,714 US properties during the second quarter.  Real estate data company reported in their survey, that 1 out of every 171 US households had received a foreclosure filing and the distress and sentiment was nationally.  In addition, the report noted that 48 of the 50 states and 95 of the 100 major city regions had experienced year-over-year increases in foreclosure activity.  “Although much of the fallout from loan defaults and foreclosures comes from rampant activity in a few states, such as Nevada, California, Florida, Ohio, Arizona and Michigan, most areas of the country are seeing at least some increase in foreclosure activity,” said RealtyTrac chief executive James Saccacio said in a statement.  Nevada, California, Arizona and Florida, where home prices soared for many years before the collapse of the US housing market in 2006, led the country in foreclosures. Nevada has been hit the worse, with 1 in 43 households reportting a home loan default which is almost four times higher than the average foreclosure rate reported nationally.

With recently passed Mortgage Rescue Bill and affordable FHA home loans, many real estate experts believe that we have already hit the bottom and that a recovery has begun.  Only time will tell, but industry insiders maintain that it will be critical for the Federal Reserve to hold off as long as possible from raising key interest rates that have a significant impact on mortgage rates and available home loan products from FHA, Fannie Mae and Freddie Mac.�

In a recent article written by Paul Jackson,  the topic of risk-based pricing expanded for FHA home loan products.  The FHA commissioner Brian Montgomery gave a speech that touched on mortgage lending for low and moderate income homes. It was suggested that the mortgage meltdown and current declining housing market could have been prevented had Congress acted on Bush administration suggestions made years ago.

In his remarks at the FDIC inspired forum, Montgomery said that Congress’ failure to modernize the FHA contributed to the subprime problem, implying that had Congress acted earlier, the mess might have been avoided.  “We were marginalized during the boom, unable to compete because of low home loan limits and higher downpayment requirements,” he said. “Well, we know the outcome, a subprime crisis that has now evolved into a worldwide credit crisis.”

“Frankly, at FHA we saw the problem coming.”The strong stance taken by Montgomery surprised more than a few market participants, who said that anyone claiming the current mortgage mess might have been avoided is wrong.  “Montgomery is usually pretty level-headed,” said one source, a senior bank executive that asked not the be named, “but this sort of grandstanding does little to help matters.”

The FHA Commissioner said that the Bush administration has pushed for FHA modernization since 2006, and that Congress has repeatedly stymied efforts to make the government insurance program “more competitive and responsive to market conditions.” 

According to a recent New York Times article, there are more than 3 million homeowners in peril, and financing analysts are forecasting over 2 million more will fall behind on their payments in the coming year as home prices fall further and the economy weakens.

Those stark numbers clearly deminstrate the challenges ahead for the lawmakers attempting to offer some relief to their voting base but also hint at what the next administration will be facing after the election. While the proposed loan program would help some homeowners, analysts say it would touch only a small percentage of those in trouble. 

According to Josh Emmons, a CFB Loan Services Manager, “this home financing bill would assist mortgage lenders and homeowners with refinance transactions for distressed home loans into a better and more affordable terms that would significantly decrease loan deafults and foreclosures.”  FHA provides a thirty year mortgage with a fixed interest rate that benefits the borrower and the government insurance protects the lenders. 

The Congressional Budget Office estimated these home loans would be used by about 400,000 homeowners and would not do much to improve the ailing housie market.“It’s not enough, even in the best of circumstances,” said Mark Zandi, chief economist of Moody’s Economy.com. The number of homeowners who will be assisted “is going to be overwhelmed by the 3 million that are headed toward default.”

Last week, the Senate voted overwhelmingly to advance the mortgage bill, and the House passed a version last month. The Senate, where the bill was delayed by a disagreement over other measures, is expected to come back after the July 4th recess and pass the mortgage aid bill.

Democratic leaders say Congress could send something to the president before lawmakers leave Washington in August.The White House, which initially threatened to veto the measure, has indicated that it is open to supporting the bill if certain provisions are removed. “The Congress needs to come together and pass responsible housing legislation to help more Americans keep their homes,” President Bush said on Thursday.�

Average rates on thirty year FHA mortgage loans in the United States increased one basis point to 6.5 percent on Friday, according to Bankrate’s daily mortgage rate report. The FHA home loans in this survey had an average less than 0.15 discount and points.

A thirty year FHA mortgage is insured by the Federal Housing Administration and has an interest rate that stays the same for the 30-year term. If a person financed a $250,000 home loan with a thirty year FHA mortgage at 6.625% would pay $1,600 a month for the life of the loan.

FHA agreed to provide mortgage insurance to buyers financing homes that were recently foreclosed on. Bloomberg believse this to be a sign the president may be ready to assist as the home sales continues to decline.

HUD agreed to insure home mortgages for low and moderate income borrowers, bad credit applicants and first-time buyers.  The first step was FHA waiving a 90-day waiting period for insurance on foreclosed property. “A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community’s recovery,” Federal Housing Commissioner Brian Montgomery said in the release.

The temporary one-year policy for foreclosure insurance indicated the US government may be easing its opposition to using taxpayer money to rescue lenders and investors in favor of letting the mortgage industry modify home loans to stimulate a deflated real estate market. The Democratic-controlled Congress has proposed a measure that is similar to the FHA insurance program. House Financial Services Committee Chairman Barney Frankintroduced legislation that would create a $15 billion loan-and-grant program to help states buy and rehabilitate foreclosed homes. The U.S. House of Representatives approved the measure last month. 

According to Realty Trac, banks repossessed twice as many homes in May and foreclosure filings rose 48% from athe previous year.  Declining property values have backed borrowers in to a corner with home loans that they didn’t have the ability to repay when the rates adjusted.