August 4, 2008 – 10:03 pm
On July 30, 2008, President Bush signed H.R. 3221, otherwise known as the Housing and Recovery Act, making it Public Law # 110-289. This complex piece of Omnibus legislative art has many provisions. Some are good, some are bad, and some are downright ugly. Which is which, of course, depends entirely on your perspective and agenda.
Regardless of your opinion, there are certain key provisions that are important to know regarding FHA loans. Let’s take a look at some of the key provisions of the FHA Modernization Act and Manufactured Housing Loan Modernization that were included in H.R. 3221:
Increased loan limits: $271,050 to a maximum of $625,500 in high cost areas. New limits take effect upon expiration of the Economic Stimulus Act of 2008. Limits apply to 1 unit, single family.
Increase in the maximum loan to value to 100%. All those pesky loan to value limits based on the amount of sales prices, area, and new construction are eliminated with one simple limit of 100%.
Increase in the maximum cash investment requirement from 3% to 3.5%. This obvious sign of legislative neurosis is partially offset by the fact that borrowers can still borrower 100% of their cash investment from a family member provided the loan is secured by a lien on the property that is subordinate to the new loan.
Elimination of seller funded down payment assistance. Yes, that’s right, waive goodbye to seller funded down payments which will no longer be allowed for mortgages underwritten after October 1, 2008. Needless to say, the games have already begun with Representatives Al Green, Gary Miller, Maxine Waters, and Mr. Shays already introducing H.R. 6694 to reauthorize seller funded down payment assistance before the ink from the President’s signature is barely dry. Here is copy of H.R. 6994 that was forwarded to me by Ameridream on 8/1/08.
Increase in the maximum upfront mortgage insurance premium (MIP). MIP is increased from a maximum of 2.25% to 3% while upfront premiums for first time borrowers completing approved homebuyer counseling is increased from a maximum of 2.0% to 2.75%. Annual premiums remain unchanged.
Raises the maximum claim amount for reverse mortgages (HECM) to $417,000 (or up to $625,500 high cost areas).
Allows condominium projects involving manufactured homes (including manufactured condominiums projects on leased land) as well as reverse mortgages in cooperative housing developments.
Allows for insurance of purchase transactions utilizing reverse mortgage financing.
Provides for the approval of all parties participating in the origination of a reverse mortgage (HECM) to be approved by the Secretary of Housing and Urban Development. It will be interested to see how this impacts non-FHA approved “advisors”.
Provides for a 12 month moratorium on the implementation of risk-based mortgage insurance premiums that are based on borrower’s decision credit score. Moratorium period begins October 1, 2008.
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