HUD Homes / VA Homes News

The Federal Housing Administration (FHA) announced last week that its reserves are set to fall below a legally mandated level. The government agency is funded through fees paid by homeowners who have FHA-backed mortgages, and that money is now at risk by the steady stream of foreclosures.

But David Stevens, FHA commissioner announced that there was no need for the government to intervene and push money to the agency. Instead, he unveiled a series of policy changes planned to reduce a risk of future losses. "There will be no taxpayer bailout," Stevens said.

However, others in the banking industry aren't so sure. With the FHA insuring more and more mortgages as banks tighten lending requirements, it could be only a matter of time before the beleaguered housing market and tough economic times cause the FHA to run out of its reserves.

Even the legislators are beginning to worry - Senator Christopher Bond has described the FHA as "a powder keg," and is worried about a new taxpayer expense.

The FHA was created during the Great Depression to help Americans buy homes. It insures mortgages secured with down payments as low as 3 1/2%. After the subprime mortgage market collapsed, the FHA has taken on a greater role in the mortgage industry. It now insures nearly 25% of the mortgage market, compared with only 2% back in 2006.

New mortgage disclosure rules that are set to take effect at the end of this month will try to protect home buyers, but could lengthen the purchasing process.

The new Truth in Lending rules will require banks to:

• Provide a good faith estimates for mortgage costs within three business days after receiving the loan application, and before collecting any fees, other than the cost of a credit check;
• Wait at least seven business days after providing good faith estimates before closing on the loan;
• Give buyers new disclosures and wait another three business days if changes to a proposed loan increase the annual percentage rate by more than 0.125 percent.

Real estate professionals believe that the new rules will add at least one week to the home purchasing process.

The increased time to closing on a loan could potentially increase costs for buyers, because the best mortgage rates usually offer just a 30-day lock period.

It also could be another blow to the shaky housing market, which is already reeling from changes to the appraisal process that is delaying or even killing home deals.

U.S. Housing and Urban Development (HUD) Secretary Steve Preston approved a $37.4 million dollar plan in Kentucky this week that will help the state recover from the effects of high foreclosures and plunging home values under HUD’s new Neighborhood Stabilization Program (NSP).

HUD’s Neighborhood Stabilization Program was created as part of the Housing and Economic Recovery Act of 2008 and makes nearly $4 billion available for states and local communities experiencing high foreclosure problems and property abandonment issues.

The program lets State and local governments buy foreclosed homes at a discount and rehabilitate or redevelop them in order to respond to rising foreclosures and falling home prices.

State and local governments will be able to use their neighborhood stabilization grants to acquire land and property; to demolish or rehabilitate properties; and to offer downpayment and closing cost assistance to low- and moderate-income homebuyers.