MBS-ProClose Attends FHA Special LIVE Online Conference

The MBS-Compliance Team attended the FHA Special LIVE Online Conference offered by CampusMBA on Wednesday August 6, 2008.  Presenters included Meg Burns, Director of the Office of Single Family Program Development, Department of Housing and Urban Development (HUD), Jim Beavers, the Office of Single Family Program Development Deputy Director, and Ken Markison, Associate Vice President and Regulatory Counsel for MBA.

We are happy to provide more information about the upcoming changes that will take effect with the Housing and Economic Recovery Act of 2008 (HERA), signed into law by President Bush last week. This legislation includes several initiatives which the MBA has long advocated, such as reform of government-sponsored enterprise (GSE) regulation and modernization of the Federal Housing Administration (FHA).

For your easy reference, some of the reforms are highlighted below:

• Higher Loan Limits — The GSE loan limit for single-family one-unit properties will be set at the greater of $417,000 or 115% of the local area median home price, with a cap of 150% of the GSE limit of $417,000 for a one-unit property, or $625,500. The local area median home price will be determined by HUD.  By January 1, a new GSE regulator will set the GSE loan limit annually based on home prices. It will also increase the loan limit for FHA mortgages for one-unit properties to the lesser of 115% of the local area median home price (but no lower than a floor of 65% of $417,000), or 150% of the GSE limit of $417,000 ($625,500). Again, the local area median home price used in this limit will be determined by HUD   The mortgage amount also cannot exceed 100% of the property’s appraised value. All new loan limits will go into effect after the limits in the Economic Stimulus Act expire on December 31, 2008.

• GSE Regulatory Reform — The Federal Housing Finance Agency (FHFA) will be established as the new regulator for Fannie Mae, Freddie Mac and the Federal Home Loan Banks (FHLBanks), replacing the Office of Federal Housing Enterprise Oversight (OFHEO), the Department of Housing and Urban Development (HUD) (except for Fair Housing regulation) and the Federal Housing Finance Board (FHFB).

• GSE Stabilization — Authority will be given to the Secretary of the Treasury to increase the existing lines of credit of Fannie Mae, Freddie Mac, and the FHLBanks.  To provide confidence in the GSEs and stabilize housing finance markets, Treasury also has standby authority to buy FannieMae, Freddie Mac or FHLBank stock.  These provisions expire on December 31, 2009.

• FHA Down Payment Requirements — At least 3.5 percent cash down payment or its equivalent investment by mortgagor will be required.  It will also prohibit seller-funded down payment assistance (not to include other assistance from friends, family, non-profits, unions, etc.), starting October 1, 2008.

• FHA "Hope for Homeowners" program — With an additional $300 billion in FHA mortgage insurance authority, a new FHA program will be established called the Hope for Homeowners program. Under this program, the principal balance and interest rate for eligible borrowers is reduced through refinancing into new, affordable FHA-insured loans based on current property values.

• Truth in Lending Act (TILA) — TILA disclosures involving dwelling secured transactions will be required to include the the statement: "You are not required to complete this agreement merely because you have received these disclosures or signed a loan application." 

Learn more about HERA by referencing MBA's HERA FAQ!