HUD Homes / VA Homes News

A proposal floated yesterday plans to give mortgage hunters better information about their loans and encourages them to shop around for the best terms.

Department of Housing and Urban Development (HUD) officials said that confusion about loan terms and closing costs have contributed to the current subprime mortgage crisis. So now, HUD is pushing for a standard form that lenders would be required to give borrowers before they commit to their loans.

Among other things, this new form would:

1) Disclose all the terms of the loan, including the interest rate and monthly payment; whether the rate or principal balance would increase and by how much; and if the loan has a prepayment penalty or balloon payment.

2) Show all settlement charges prominently, including the fees paid for any outside services. It would also specify which of those charges could change at settlement time, and by how much.

3) Require lenders to reveal the fees that they give to mortgage brokers.

HUD would also now require mortgage settlements to provide a "closing script" to borrowers at the settlement table, and to provide copies to all parties.

The agency is now in the process of gathering public comment on the rule changes until mid-May and hopes to have them in place before President Bush's term ends.

The Department of Housing and Urban Development (HUD) last week warned Congress that the Federal Housing Administration (FHA) could face financial difficulties if legislators limit its ability to charge higher premiums to riskier borrowers.

A letter, addressed to House Financial Services Chairman Barney Frank, D-Mass., and Senate Banking Committee Chairman Christopher Dodd, D-Conn., said that "FHA will move ever closer toward financial insolvency, given the uncertainty and volatility in today's mortgage market if forced to continue its current premium structure."

The letter was written by HUD Secretary Alphonso Jackson.

Currently, the Bush administration opposes FHA-reform provisions that would limit their ability to charge borrowers fees above a certain amount.

Proponents of the legislation, such as Rep. Frank, have stated that the limitations will make FHA loans available to more borrowers who might otherwise be excluded by higher fees or larger down payment requirements.

Homeowners facing foreclosure or worried about a big rise in their monthly payment when their "teaser rates" expire should look at refinancing with a Federal Housing Administration (FHA) loan.

U.S. Housing and Urban Development Secretary Alphonso Jackson said FHASecure loans have given thousands of homeowners a stable landing place with a fixed-rate mortgage.

Guidelines for Federal Housing Administration Loans:

To qualify, homeowners must meet the five following criteria. For housing counseling, call (888) 995-HOPE.

- A history of on-time mortgage payments before teaser rates expired and reset.

- Interest rate must reset between June 2005 and July 2009.

- Three percent cash or equity in home.

- Sustained employment history.

- Enough income to make FHASecure payments.