Down Loans Expected to Increase Minority Homeownership
American families who pay their bills on time and have the income
necessary to support a monthly mortgage payment have difficulty
saving up for a downpayment. HUD recently proposed adding a zero
downpayment option to complement the traditional Section 203(b)
mortgage insured by the Federal Housing Administration (FHA), which
requires a 3 percent downpayment, as part of its FY 2005 budget
request. The Zero Downpayment Initiative will enable creditworthy
but cash poor families to borrow the full purchase price of a home
as well as finance their closing costs.
FHA mortgages with no downpayment will unlock the door to homeownership
for hundreds of thousands of American families, particularly minorities,”
Secretary Alphonso Jackson said. HUD developed the proposed program
as one part of the Bush Administration’s efforts to close
the minority homeownership gap and create 5.5 million new minority
homeowners by the end of the decade. With an estimated 150,000 families
becoming homeowners as a result of the Zero Downpayment Initiative
during the first year alone, this program would help achieve that
Zero Downpayment program would be available only to first-time homebuyers
for the purchase of one- to three-unit properties. Borrowers taking
advantage of the program would be required to meet the same underwriting
requirements — such as payment-to-income ratios and credit
standards — as all other FHA borrowers. They would also be
required to meet additional requirements designed to protect the
Mutual Mortgage Insurance (MMI) Fund and minimize defaults.
Zero Downpayment applications would be subject to evaluation using
FHA’s TOTAL (Technology Open to Approved Lenders) Mortgage
Scorecard risk assessment tool. The TOTAL Scorecard helps predict
whether a borrower is a good or bad risk based on creditworthiness.
This system is already used by FHA lenders in conjunction with an
automated underwriting system (AUS). About 75 percent of current
FHA-insured loans are risk-assessed by the TOTAL Scorecard through
would also be required to participate in a one-on-one housing counseling
program before entering into a sales contract. HUD-approved housing
counseling agencies provide a wide range of services designed to
help individuals and families improve their housing situations.
They can provide potential homeowners with information on preparing
household budgets, saving for a downpayment, developing or improving
credit records, and avoiding predatory lending practices. Recent
studies, such as one conducted by Freddie Mac, indicate that housing
counseling has a very positive effect on reducing mortgage delinquency.
As part of its FY 2005 budget request, HUD increased funding for
housing counseling by $5 million. John C. Weicher, Assistant Secretary
for Housing–Federal Housing Commissioner, estimates that about
half of the requested increase will be spent in conjunction with
the Zero Downpayment Initiative.
buyers taking advantage of the new program will be subject to a
slightly higher mortgage premium, which will offset the greater
risk to the MMI. Currently, FHA borrowers pay an upfront insurance
premium of 1.5 percent of the loan value and a 0.5 percent annual
premium. Zero Downpayment borrowers would pay an upfront premium
of 2.25 percent and annual premiums of 0.75 percent. Zero Downpayment
borrowers can expect to pay about $50 more per month on a $100,000
mortgage than traditional FHA buyers for the first five years. After
five years, the annual premium drops back to the 0.5 percent level
for the remaining life of the loan.
Housing Commissioner Weicher summed up the benefits offered by the
program, stating, “This initiative would not only address
a major hurdle to homeownership and allow many renters to afford
their own home, it would help these families build wealth and become
true stakeholders in their communities.”
All information contained in the above article is provided for information
purposes only. No warranty is either expressed or implied. This
program is pending Congressional approval and funding. Under no
circumstances will HUD be liable for any loss or damage caused by
a user's reliance on information obtained through this article.
Offers New Adjustable-Rate Mortgage Products
recently expanded its offerings of adjustable-rate mortgage (ARM)
products on FHA-insured mortgages in an effort to increase opportunities
for homeownership, particularly for minority families. An estimated
40,000 families a year are expected to take advantage of the new
Bush challenged all of us to work to close the minority homeownership
gap," Secretary Jackson said. "This will be an important
tool to help create such opportunities for minorities and all Americans
who are on the doorstep of homeownership."
the new rule that went into effect on April 10, potential homebuyers
can choose ARM periods of three, five, seven or ten years, depending
on their needs. The interest rate for three-year and five-year Arms
cannot change by more than 1 percent per year after the fixed-payment
period is over, with a maximum change of 5 percent for the life
of the loan. For seven-year and 10-year Arms, the maximums are 2
percent annually and 6 percent for the life of the loan.
the only FHA-insured ARM that is available has a one-year fixed
payment period, with caps of 1 percent a year and 5 percent for
the remainder of the loan. That loan will still be available.
the first time ever, more than half of all minority households are
now homeowners," said Federal Housing Commissioner Weicher.
"President's Bush initiative will continue the growth we have
seen over the last three years and continue to close the minority
Provides Elderly with One-Stop Information Center
living is one of the fastest growing segments in the overall housing
industry, and the need for affordable assisted living options for
elderly public housing residents is a priority for many rural and
health care and daily living services —
such as nursing, nutrition and meals, case management and homemaking
help seniors to avoid institutionalization and remain independent
as they age. The complexity of designing, financing and operating
senior housing that incorporates assistive services can stymie the
efforts of nonprofit organizations whose mission is to meet the
needs of very low-income seniors.
HUD kicked off the Senior Housing Information Center to provide
a set of tools to help public and tribally designated housing authorities
(PHAs and TDHAs) —
to build or modernize housing projects that allow the elderly to
age in place and avoid unnecessary institutionalization.
Liu, HUD’s Assistant Secretary for Public and Indian Housing
(PIH), launched the project in 2001 by forming a senior housing
committee to provide technical assistance for PHAs and TDHAs. A
Call Center Committee began responding to inquiries from PHAs and
TDHAs in that year. A committee of assisted living experts from
around the country helped design the website for the Senior Housing
Information Center unveiled earlier this year, according to David
Fleischman, PIH, Call Center Committee Chairperson.
website includes step-by-step information on assisted living operations,
real estate development, and state and federal healthcare agency
financing requirements, including the following tools:
Financial Feasibility Analysis Model, provided by NCB Development
Corporation. The free model provides a preliminary spread sheet
analysis of operating and real estate development costs and requirements
based on best practices models of affordable assisted living.
PHAs and TDHAs can customize the spread sheet with specific local
such as facility size, state reimbursements for publicly supported
tenants, and local costs and labor rates —
to determine financial viability of projected projects.
links to state Medicaid agencies and the specific steps PHAs and
TDHAs have to take to get funding for health care services for
elderly residents from the state and the federal Centers for Medicare
and Medicaid Services (CMS), an agency of the Department of Health
and Human Services (HHS). In May, the HUD website included a link
to a new CMS grant program supporting integrated health and housing
of 11 state programs that were chosen as Best Practices Innovative
Models by the Call Center Committee. The PHAs involved with these
programs describe the real-world challenges they faced and lessons
they learned in developing assisted senior living programs. The
PHAs used both competitive and discretional funding in developing
these model programs. According to Fleischman, the 11 PHAs receive
information requests on their projects and experiences from around
the country on a regular basis.
chairperson for both the senior housing initiative and Call Center
Committees, Fleischman has been screening and referring calls to
appropriate committee members. He added that the website mailbox
and the toll-free call center duties were being transferred to an
independent contractor this summer.
Partnership for Advancing Technology in Housing (PATH), with the
support of HUD as well as partners in public and private sector,
promotes the development, introduction and adoption of innovative
building technologies and processes that improve the affordability,
safety and efficiency of the nation’s housing stock. These
technologies reflect the most up-to-date approaches to increasing
housing quality and durability, affordability, energy efficiency,
environmental performance and safety. In addition, PATH offers visitors
to its website access to online tools to help them improve the energy
efficiency of existing structures undergoing renovation and select
the most durable and cost-effective materials for individual building
and renovation projects.
Efficient Rehab Advisor is a web-based tool designed to help
contractors, homeowners, facility managers, and public and private
sector housing organizations identify and incorporate energy efficient
materials and systems in the renovation of existing residences.
The tool provides recommendations based on user-provided information
concerning the type of building, local climate and age of the structure.
can request information for whole house improvements, individual
room remodeling or measures related to specific systems, such as
wiring, plumbing or window replacement. Recommendations include
estimates of up-front costs related to individual projects, the
resulting annual savings and payback time. Icons categorize individual
measures based on their contributions to comfort, durability, ease
of maintenance, indoor air quality, operating cost savings, noise
reduction, increased control of energy usage, environmental impact
and water conservation.
Economic Service-life Tools (NEST) website offers online tools
being developed in conjunction with the National Institute of Standards
and Technology to help consumers identify durable, cost-effective
building components, such as roofing, siding and windows.
Durability Doctor was one of the first tools developed. Visitors
to the Durability Doctor section of the site begin by entering information
about their building, such as number of stories, square footage,
age, roof and siding types, number of windows and doors, and construction
material specifics. Using this information, the Durability Doctor
allows users to compare the roofing, siding, windows and garage
characteristics of their residences with those that would have the
lowest installation cost, lowest monthly cost and greatest durability.
Estimated monthly costs over the life of the product are also provided.
Additionally, the website provides estimated installation costs
(materials and labor).
Nest Builder is another tool available on the site, which uses information
about a house to analyze durability options. Anticipated additional
tools include a replacement calendar for major components, a natural
hazards risk assessor and a sealant wizard.
and Regulations Update
issues Mortgagee Letters to inform lenders of changes in FHA operations,
policies and procedures.
Letter 2004-19, issued April 30, updates Mortgagee
Letter 2003-03, issued February 25, 2003, and its instructions
concerning Title I and Title II Nonsupervised Lenders/Mortgagees
and Loan Correspondents. It further announces that HUD will no longer
accept a paper audit report for recertification except under the
Letter 2004-20, issued June 9, changes Mortgagee
Letter 2002-09, dated May 3, 2002, to reflect the correct addresses
for First Preston Foreclosure Specialists in its various territories.
Letter 2004-21, issued on June 15, provides interim guidance on
the submission of form HUD-9807, Insurance Termination Request for
Multifamily Mortgage. It also streamlines HUD field office and Headquarters
staff review of requests for insurance termination.
Letter 2004-22, issued on June 16, updates Mortgagee
Letter 2003-17, issued October 16, 2003, which discussed several
changes that HUD implemented to simplify both the origination and
claim filing processes. The instructions did not specifically address
HECM mortgages, and Mortgagee Letter 2004-22 corrects this oversight.
Letter 2004-23, issued on June 18, announces enhancements made to
the Neighborhood Watch Early Warning System since the issuance of
Letter 2003-15, Enhancements to the Neighborhood Watch Early
Warning System, dated September 17, 2003.
Letter 2004-24, issued on June 18, reminds mortgagees of the additional
financing opportunities FHA makes available to qualified veterans.
Letter 2004-25, issued on June 23, clarifies the housing counseling
requirements of the HECM Program.
Letter 2004-26, issued on June 23, announces that lenders may now
file conveyance and pre-foreclosure sale claims electronically using
the FHA Connection.
Letter 2004-27, issued on July 21, updates Mortgage
Letter 2004-25, which issued guidance to mortgagees and housing
counseling agencies to comply with FHA requirements for the HECM
Letter 2004-28, issued on July 21, provides additional guidance
to mortgage lenders regarding FHA policy for accurately estimating
property taxes on newly constructed homes, the correct manner of
completing form HUD-92900-PUR when building a home on land already
owned by the borrower, gift funds documentation, interest rate buydowns
and use of hybrid adjustable-rate mortgages for streamlined refinance
Letter 2004-29, issued on August 2, provides additional guidance
concerning the issuance of the FHA inspector roster final rule,
published March 10. The rule, which became effective April 9, established
HUD's policies and procedures governing the roster.
Letter 2004-30, issued on July 30, announces the FY 2003 annual
lender performance scores for loss mitigation.
Letter 2004-31, issued August 12, announces the development of the
FHA Connection Business-to-Government specification, designed as
a means to streamline access to FHA's business functions. The specification
allows lenders to transmit data directly from their own internal
loan processing systems to FHA without re-keying data into the FHA
Connection or functional equivalent.
Letter 2004-32, issued August 16, was issued as a reminder to mortgagees
of the availability of FHA single family programs for victims of
major disasters, including victims of Tropical Storm Bonnie and
Letter 2004-33, issued on August 24, explains that legislation to
amend Section 224 of the National Housing Act was included in HUD's
appropriation act for FY 2004. This change provides that interest
paid on single-family mortgage insurance claims will now be paid
based on the debenture rate in effect at the time of the mortgage
default, rather than the rate in effect at the time of mortgage
bankers and others associated with mortgage loans will be interested
to know that HUD's business partners
page contains links to a wide variety of resources available
on HUD's website including what's new, online tools and a listing
of all FHA Mortgagee Letters.
has partnered with FedStats
and the U.S. Census Bureau to provide key government-wide statistical
data and information about cities, counties, states and the nation
on an enhanced MapStats section of the FedStats website. MapStats
provides information on housing, income, poverty, births and deaths,
crime, employment, businesses, retail sales, education levels, travel
time to work, minority-owned firms, weather and a host of other
visit the Housing
Today subscription page to add your name to the Housing Today
mailing list, or HUDs publication subscription
page for a variety of other Housing and HUD publication mailing
Today is a publication of the US Department of Housing and Urban
Development's Office of Housing. Look for this newsletter and other
information about Housing at HUD's
homepage. Send your comments or contributions to the Housing
Today mailbox. We look forward to hearing from you!