ELIMININATING LIFE OF LOAN PREMIUMS
FHA should end its Life of Loan
premium policy that was put in place in 2013.
(1) Overcharges borrowers, who have
paid 10% in premiums by the time they hit the 78% LTV mark,
(2) Hurts FHA finances by reducing its
refinance retention rate from over 50% to below 15% today, and
(3) Contributes to Ginnie Mae
OTHER POLICIES AND ACTIONS
Modernization of FHA Technology Upgrades.
reauthorize lapsed authority under Section 2126 of HERA for FHA to use $25
million from its $7 billion in annual net profits to fund needed IT and other
technology upgrades. This approach
should be pursued instead of imposing a $25/loan fee, which will be passed
along to borrowers.
- Modify Premium Structure. FHA should reduce its annual premium to .55% and
increase the upfront premium to offset the revenue loss. This upfront increase should then be
eliminated when the FHA forward program Net Worth Ratio exceeds 4% and the
overall ratio exceeds 3%.
Disproportionate Penalties for Missing Servicing Action Dates. FHA financial penalties
for failure to meet specific dates for taking action on non-performing loans
are disproportionately high relative to the impact of failure to meet those
dates and should be adjusted appropriately.
Underwriting Guidelines. FHA should modernize its
underwriting guidelines to more accurately reflect sources of economy which
merit consideration, such as work performed in the gig economy and small
- Increase Maximum
Loan Assumption Fee. FHA
should raise the maximum FHA lender loan assumption fee from $900 to $3,000 per
loan, to keep pace with inflation.
- Finalize Pending
FHA Condo Rules. FHA
should finalize pending proposals to increase flexibility for FHA condo loans,
including eliminating owner occupied percentages in condo developments and
streamlining certification process.
- Back-end Reforms
for FHA Reverse Mortgage HECM Program. FHA should extend the Cash
for Keys authority to make it available for all HECM loans and should allow
existing servicers to retain servicing after the 98% LTV HUD assignment date
instead of transferring servicing responsibilities for all HECM loans to a HUD contract