House Passes H4H Bill

House Passes H4H Bill

May 19, 2009

The House passed by a 367-54 vote a bill that revamps the FHA 'Hope for Homeowners' program and gives the HUD secretary discretion in setting insurance premiums on refinancings of underwater borrowers. The Senate is expected to pass the measure later this week. The bill (S.896) allows the Department of Housing and Urban Development to charge an upfront mortgage insurance premium of up to 3% and an annual premium of up to 1.5%. Previously, Federal Housing Administration had to charge a set premium of 3% and 1.5% respectively. It "requires the HUD secretary to weigh both the financial integrity of the program and the bill's purposes of foreclosure prevention in setting premiums," according to a summary of the legislation Servicers are expected to reduce the principal amount of the existing mortgage to qualify borrowers for the H4H program that Congress enacted last summer. However, the program is so restrictive that FHA had endorsed only one H4H refinancing as of April 30 with 916 applications pending. The Mortgage Bankers Association and other industry groups support Congress' efforts to relax the eligibility requirements and other requirements to make the program user friendly for homeowners, servicers and investors. S.896 also shields mortgage servicers from investor lawsuits and provides the Federal Deposit Insurance Corp. with more borrowing authority to deal with the rising bank failures. House and Senate leaders agreed to keep a temporary increase in the $100,000 deposit insurance limit at $250,000 through 2013.

JMO: This is a good thing. By allowing the HUD to charge "up to" 3% and 1.5% respectively, this will allow HUD to carry some for burden for affordability. These are fees that directly impact the homeowner/borrowers debt-to-income ratio. By lowering these fees, it could allow more borrowers to qualify.