John Taylor, President & CEO of the National Community Reinvestment Coalition, testified on the introduction of H.R. 703 and the need for a broader-scale loan modification program such as FHA Hope for Homeowners and Homeowners Emergency Loan Program (HELP Now).

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NCRC’s John Taylor Testifies on HR703 with Improvements for FHA’s Hope for Homeowners  

We need the federal government to exercise its authority to purchase troubled assets in an effort to fight off the foreclosure crisis and the need for enhanced consumer protection through comprehensive anti-predatory lending legislation.  HUD continues to enhance FHA loan programs to meet the needs of homeowners.

In a recent Washington Post article written by Kenneth Harney last weekend introducing new mortgage fee increases, for FHA loans and stricter down payment rules and higher credit score requirements from HUD, Fannie Mae and Freddie Mac as soon as April 1st.  According to the article, “Most major FHA mortgage lenders are already pricing in these higher fees, effectively raising costs to borrowers immediately and reducing the impact of housing stimulus efforts from Congress and the Obama administration.”

Falling FHA Mortgage Rates

The new FHA loan guidelines mean that even borrowers with good credit scores will be charged more for a mortgage loan unless they can make a down-payment of 30% or more.  Even someone with a 739 FICO -- once considered a platinum guarantee of the best rates available -- will get dinged with a quarter-point add-on.  Harney points out, fico scores in the upper 600s were deemed good enough for prime rate home financing just a couple of years ago. Now some borrowers with credit scores of 720 to 740 may not be enough to prevent an add-on fee to their FHA home loan, especially if they are buying a condominium or town home.

Potential home-buyers need to do all they can to increase their credit score and to accumulate enough funds for a more substantial down-payment, both moves which make good financial sense anyway.  But the best home loan solution is the basic FHA mortgage: Apply for an FHA loan, which requires a down-payment of just 3.5% and in most cases has lower credit score requirements.  FHA mortgage rates remain at record levels with national lenders reporting interest rates as low as 5.25% on 30-year fixed rate mortgages.

“In today’s weakened economy where access to credit is being restricted, we need to make home mortgages more available to households throughout the country, and especially in high-cost areas,” said Preston. “These new FHA loan limits will ensure HUD can to continue aid distressed homeowners with safer home refinancing featuring secure fixed rates from affordable government-insured loans that enable many first-time buyers take advantage of today’s buyers market”

FHA mortgage loan limits were increased recently back to 2008 FHA loan limits in high cost housing areas, too -- to a maximum of $729,750 in some areas. Visit the FHA website to check the FHA loan limits for your area.  This website enables consumers to look up the maximum FHA mortgage limits for your area or several areas, and then list them by state, county, or Metropolitan Statistical Area.

Hope for Homeowners is the widely discussed FHA refinance loan that requires lenders to reduce the principle mortgage balances down to 90% of today’s appraised value.

Fox Business New’s Rich Edson reports on Rep. Barney Frank’s work to overhaul the Hope for Homeowners program.  So far, this FHA loan program has been unsuccessful.  FHA lenders offering the H4H home refinancing product would have to reduce the mortgage balance to 10% below the current market value. 

Government eliminates some liability for mortgage lenders who participate in this FHA loan program design to minimize the foreclosure crisis with a loan modification type solution for struggling homeowners.