BUSH ADMINISTRATION IMPLEMENTS EXPANSION OF FHASECURE MORTGAGE ASSISTANCE FOR ST

Fair and flexible insurance plan will help more families and better protect taxpayers against risk

WASHINGTON - The Bush Administration today implemented an expansion of its flagship mortgage insurance program to assist more homeowners who are struggling to keep up with their high-cost subprime adjustable rate mortgages. HUD's Federal Housing Administration (FHA) has expanded its FHASecure refinancing product to help bring liquidity to the housing market and insure more mortgages for borrowers who were late on a few payments and/or received a voluntary mortgage principal write-down from their lender.

"Starting today, even more families will be able to turn to FHA to find an affordable mortgage and save their homes from foreclosure," said HUD Secretary Steve Preston. "This broader FHASecure refinancing product allows FHA to reach even more troubled homeowners without putting taxpayers or its insurance fund at risk."

With this expansion, FHA is on pace to help 500,000 families refinance into a more affordable mortgage product by the end of this year. The plan, which is designed to help address the adverse economic conditions affecting many communities across America, will help break the cycle of house price depreciation that is being caused by an increasing number of foreclosures and the overall contraction in the credit market.

In August 2007, FHA initially modified its refinancing program to help creditworthy homeowners who missed their mortgage payments as a result of the payment shock associated with interest rate resets. Today, FHASecure is expanding its eligibility criteria to homeowners who have gone into default as a result of temporary economic setbacks. FHA will adjust the loan-to-value cap to provide an additional risk control, as follows:

1. Borrowers who are delinquent on their adjustable rate mortgages, but who were late on no more than two monthly mortgage payments over the previous twelve months are eligible for the standard 97 percent loan-to-value (LTV) FHASecure refinance loan.
   
   
2. Borrowers delinquent on their adjustable rate mortgages who were late on three consecutive monthly mortgage payments or at three different times over the past twelve months will be eligible for a 90 percent LTV ratio FHASecure refinance loan.

With these new criteria, the expanded FHASecure can help additional borrowers access a more viable refinancing option and will offer lenders an alternative to foreclosing on these individuals. Lenders may voluntarily write down the outstanding subprime mortgage principal balances to a 97 percent or 90 percent LTV ratio depending on the borrowers' circumstances. FHA will also encourage lenders to make other arrangements, such as subordinate financing, to "fill the gap" between the existing loan balances and the FHA-insurable loan amount. The refinanced loan amount backed by the FHA would be based upon a new appraisal, performed by an FHA-approved appraiser.

Like most other insurance companies, FHA will begin pricing insurance premiums according to borrowers' credit risk. To protect taxpayers, FHA will implement a fair and flexible premium pricing structure. Previously, FHA had a 'one size fits all' premium structure that charged borrowers 1.50 percent of the loan balance upfront and .50 percent annually regardless of their credit standing. product in a responsible manner.

"Fair and flexible premium pricing is a common sense solution to helping more lower-income American families stay in their homes and protecting the solvency of FHA. It is about time our pricing mechanism rewarded lower income families who live within their means and pay their bills on time," said Assistant Secretary for Housing - Federal Housing Commissioner Brian D. Montgomery.

An analysis of FHA borrowers showed that risk-based pricing actually benefits lower-income American families. Contrary to conventional wisdom, FHA families with the lower incomes have higher FICO scores because they live within their means and pay their bills.

Under the new structure, FHA's upfront mortgage insurance premium will range from 1.25 percent to 2.25 percent. Borrowers must continue to adhere to FHA's strict underwriting criteria, such as fully documenting their income and job history. This premium structure will preserve lower premium costs for FHA's traditional borrowers, including low-income and minority families who have a strong credit history and save for a down payment.

By charging slightly higher premiums based on risk, FHA will be able to extend the benefits of its FHASecure program to more homeowners affected by the volatility in the mortgage market. Borrowers refinancing into FHA from the subprime market are better off, even with slightly higher mortgage insurance premiums, because FHA insurance gives them access to substantially lower interest rates and lowers their monthly mortgage payments.

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STATEMENT BY HUD SECRETARY STEVE PRESTON ON PENDING HOUSING LEGISLATION

WASHINGTON - U.S. Department of Housing and Urban Development Secretary Steve Preston today issued the following statement regarding housing legislation that is being debated by the U.S. Congress.

This legislation is a mixed bag. The proposed legislation takes important steps to provide stability and confidence in the financial markets and in the institutions that support American's ability to gain access to affordable mortgages.

Yet, the bill ties our hands and denies us the proper tools to help more families. FHA has recently expanded its ability to refinance homeowners trapped in subprime adjustable rate mortgages. As we help more struggling families, FHA has implemented a fairer, more flexible pricing structure.

Unfortunately, this legislation would ban FHA's ability to charge differential pricing. Now, FHA will be required to increase prices on all customers or eliminate its refinancing program for subprime borrowers at a time when they need it the most.

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Difference of 560 and 660 credit score is hundreds of dollars!

Does credit scores make a difference in savings on your mortgage
payment? Here's a chart that clearly shows the differences.

Based on a 30 Year Fixed Rate Mortgage and a
$300,000 loan amount, here are the FISC Scores,
APR, and monthly payment amounts:

760-850...6.005%...$1,800
700-759...6.227%...$1,843
660-699...6.511%...$1,898
620-659...7.321%...$2,061
580-619...9.452%...$2,512
500-579..10.311%..$2,702

Notice the differences could have a dual impact, depending on
not just the score, but where in the range you are located.

For example, from the chart above, we see a score of 660 would
have a monthly payment of $1898. If the borrow would of had a
760 score, 100 points higher, they would have saved $98, $1176
a year.

Perhaps, that savings could have paid your car insurance for the
year, of the gas bill, or the cost of your cell.

But take a look at this comparison now, and this is why there is
so much talk about credit scores and the fact all consumers need
to take them seriously.

Let's suppose you were granted a loan with 560 score (actually,
those days probably are gone with yesterdays collapse of the sub
prime lending market).

You'd probably have to get a hard money lender to help you this
score. And you can expect much higher interest rates than you

see here in these tables.

But for the sake of our example here, we see the 560 score
requires the borrow to make a $2702 monthly payment (primarly
all interest --- because of the high risk a score that low traditionally
carries with it).

If that borrow could have worked on their credit and had improve
on making payments on time, they could bring their credit scores
up 100 points to 660 and have a mortgage loan payment of only

$1898 ----

Folks, that's a savings of $804 per month for a
100 point increase on their credit score.

Need we say more? That would be a savings of $9648 yr.

And this folks is why, so many people who are in debt over their
heads, and can't seem to get out. Because they do not realize
the sins of the past follow you for a minimum of 7 years and even
longer in some circumstances.

However if you can start tomorrow (like this author did years ago),
you can bring up a score by 100 points in less than a year.

And here is a million dollar tip (he us loud and clear)......

1. Get a checking account if you dont have one. Consider one
with no service charge. Many banks require only that your
balance not go below $500 to not be charged a service charge

on your account for that month. You need to check out the

different accounts!

2. Set up a FREE bill payer account that is linked to your checking.

3. Enter "all" recurring bills into your bill payer system. Be sure
the date you choose for the payment to be made is 7 days prior

to the due date. If you don't your payment through bill payer

could arrive late and you have defeated your purpose.

The recommendation to put all recurring bills (utilities, mortgage

payment, everything that comes on a statement every month)

into that account.

Now you will say, yeah, but the utility bill changes monthly. OK,

so talk with your utility company and get yourself on a budget plan

with them. The budget plan adds up the total costs of the utility

for the past 12 months, divides it by 12 and provides you the

average monthly amount.

If you opt for the budget plan process, your will pay a fixed fee

each month. Whatever that fee is, add $5 to your monthly

payment so you build a small reserve. Do that with each utility,

including your cell phone.

(Cell phone is harder to do)....

For me, I looked at my largest month and made that my average

and I know of no cell phone carrier who will allow budget plans so

I just send them that estimated fixed amount I figured out, and it

just overpays and builds a credit balance month after month.

Trust me, the bill payer process takes away the responsibility of

having to remember when to send bills. It will do it for you.

But remember, you to review the bill payer account at least once

a month. Just to see if you need to change anything.

By the way, I forgot to mention, is an SAFE ONLINE INTERNET

PROCESS with tons of security on it by the bank.

This account allowed me to make my payments each and every

month ON TIME EVERY TIME --- and that is precisely what the

credit bureaus measure to determine your score.

Like I say, this tip alone, brought my credit scores up 100 points

to 660 in about 12-14 months. Today my score sits at 802 and

has been in the mid to high 700's for many years! My wifes'

scores are even higher than mine! And think of the savings!

5 Factors That Decide Your Credit Score

Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage. The following factors affect your score:

1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.

2. How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it's a good thing if you have a good proportion of balances to total credit limits.

3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer's oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.

4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.

5. The types of credit you use. Generally, it's desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example.

For more on evaluating and understanding your credit score, visit

.

Many Underestimate Credit Score Importance

While the nation's credit-scoring program is a critical factor in determining what individual borrowers pay in interest on credit cards and mortgages — and even how much they pay for insurance — new research suggests that most Americans still do not understand how the system works.

Respondents to a recent Consumer Federation of America/Washington Mutual Inc. survey largely did not know that credit scores are derived from payment histories, with many participants mistakenly believing that the number is influenced by such factors as income, age, education, and marital standing.

According to Anthony Vuoto of Washington Mutual Card Services, if all consumers took steps to boost their credit scores by at least 30 points, they together would realize as much as $28 billion annually in savings.

 

So, what You Can Do to Improve Your Credit?

 

Credit scores, along with your overall income and debt, are big factors in determining whether you'll qualify for a loan and what your loan terms will be. So, keep your credit score high by doing the following:

1. Check for and correct any errors in your credit report. Mistakes happen, and you could be paying for someone else's poor financial management.

2. Pay down credit card bills. If possible, pay off the entire balance every month. Transferring credit card debt from one card to another could lower your score.

3. Don't charge your credit cards to the maximum limit.

4. Wait 12 months after credit difficulties to apply for a mortgage. You're penalized less for problems after a year.

5. Don't order items for your new home on credit — such as appliances and furniture — until after the loan is approved. The amounts will add to your debt.

6. Don't open new credit card accounts before applying for a mortgage. Too much available credit can lower your score.

7. Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.

8. Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.

Companies Help Employees Buy Homes

In the wake of the housing crisis, more businesses are offering employer-assisted housing (EAH) programs.

Illinois was an early advocate of such programs, approving a law to provide a tax credit of 50 cents for every dollar that employers invest in EAH. Other states have followed suit, and similar legislation has been rolled out at the federal level as well.

The plans generally combine counseling services with down payment assistance. The down payment programs are usually loans that are forgiven if the employee stays with the company a certain amount of time, which also helps reduce employee turnover.

The programs appear to work. A recent study of one of the oldest EAH programs at Aurora Health Care in Milwaukee showed that the 208 employees who bought homes through the program stayed with the company significantly longer than average and performed better than other employees.