FHA may slash upfront costs of some reverse mortgages

The agency is finalizing plans to reduce the initial mortgage insurance premium on certain loans to 0.01% of a home's value from 2%. Homeowners, however, would be able to borrow less and have to pay more per month.

The Federal Housing Administration isn't talking publicly about it, but the agency may be getting ready to cut the upfront costs of reverse mortgages for some borrowers.

The agency also, however, may be reducing the amount seniors can borrow against their homes.

In a recent conference call with industry participants, FHA officials said they were finalizing plans to offer a home-equity conversion mortgage requiring almost no upfront mortgage insurance premium, according to the National Reverse Mortgage Lenders Assn. The FHA also may tinker with the traditional product in a way that increases the overall borrowing costs.

"HUD is looking at options to provide a lower-priced [home-equity conversion mortgage] option," said Lemar Wooley, a spokesman for the U.S. Housing and Urban Development Department. "We are still working out the details. Our basic plan is to make the product more attractive, while limiting FHA's exposure to risk."

HUD redefines “foreclosed” and “abandoned” properties

The U.S. Dept. of Housing and Urban Development (HUD) has expanded the Neighborhood Stabilization Program (NSP) by changing its definition of “foreclosed” and “abandoned” properties to include properties in mortgage default and uninhabitable homes with lingering code violations. These expanded definitions, effective immediately, will increase the reach of NSP by allowing more properties to qualify for NSP assistance, remove existing barriers caused by market conditions, and help state and local grantees to meet a Congressional requirement that they obligate all of their NSP1 funding by September of this year.

Properties now will be eligible for NSP assistance if any of the following conditions apply: The property is at least 60 days delinquent on its mortgage and the owner has been notified; or the property owner is 90 days or more delinquent on tax payments; or under state or local law, foreclosure proceedings have been initiated or completed; or foreclosure proceedings have been completed and title has been transferred to an intermediary aggregator or servicer that is not an NSP grantee, subrecipient, developer, or end user.

HUD also is expanding the definition of an abandoned property to include homes where no mortgage or tax payments have been made by the property owner for at least 90 days or a code enforcement inspection has determined that the property is not habitable and the owner has taken no corrective actions within 90 days of notification of the deficiencies.

HUD reverses plan to allow use of $8000 tax credit for downpayment

On May 14th, HUD announced that first-time homebuyers would soon be able to access their $8,000 federal tax credit when closing on a home through a short-term bridge loan that will cover their down payment on FHA-backed loans.

HUD officials on Monday, May 18th reversed this earlier decision and details backing the 5/14 announcement were withdrawn from the HUD website.

Despite favorable reaction from the real estate industry to the bridge-loan proposal, not everyone was in favor of using the tax credit as collateral on a down-payment loan.

The loans also could have potentially created income-tax issues, according to the IRS officials who derailed HUD's plan.

This doesn't mean that HUD and lawmakers will not allow this in the future. Stay tuned - we'll keep you posted!