Monday, November 26, 2012

FHA Upcoming Policy Changes

The FHA plans to accelerate its recovery

In the same report, issued by the Housing Administration last week, that showed a negative economic value for its capital reserve fund for the first time in its history last week, the FHA outlined an “Action Plan” to strengthen the fund and speed its economic recovery in the next few years.

The FHA projects that, if no policy changes or other operating changes were to be made, its fund will be positive in 2014 and reach the mandated ratio of 2.0 percent by 2017. With new policies and programs in place, the FHA is expecting the fund will be positive within the year and reach the mandated capital reserve ration by 2014.

Upcoming policy changes outlined by the FHA

  • Strengthen assistance programs for delinquent homeowners — the FHA is aiming for payment reductions of at least 20% for FHA-HAMP modifications
  • Streamline FHA short-sale process — and reduce the number of traditional FHA REO foreclosures, which are significantly more costly
  • Change the FHA premium cancellation policy — premiums will be required to be paid for the life of the loan, a change from the current policy which allows homeowners to let the policy lapse after the home had achieved 22% equity
  • Increase the mortgage insurance premium by 0.1 percent
  • Accelerate asset disposal programs to sell up to 10,000 distressed mortgages each quarter
  • Revise the HECM (reverse mortgage) program to lessen its negative impact on the fund — projected changes include reducing the initial amount borrowers are allowed to draw at loan orgination and reducing the maximum amount of funds available to the borrower throughout the program

Read the FHA’s full report here.

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