FHA’s Office of Single Family Housing CONFIDENTIAL. PROPRIETARY. INTERNAL USE ONLY Presented by: Michael Levine Housing Program Officer, Office of Single Family Housing U.S. Department of Housing and Urban Development HUD Philadelphia Homeownership Center Update on FHA Mortgage Programs Pennsylvania Homes Within Reach Conference Harrisburg Hilton November 17, 2015

FHA’s Office of Single Family Housing 2 Today’s Presentation FHA Loan Affordability: Features that make an FHA loan affordable and a historic vehicle for access to credit. FHA Update: What FHA is doing to address three Single Family priorities: ―Expanding Access to Credit ―Ensuring Long Term Viability of the Mutual Mortgage Insurance Fund ―Making it Easier to Do Business with FHA

FHA’s Office of Single Family Housing 3 FHA Affordability: Providing Access to Credit for Many Families and Purposes Features that make FHA the current choice of many first-time homebuyers and those with special housing needs

FHA’s Office of Single Family Housing 4 Affordable Features of FHA Loans Down payment requirement: Only 3.5 percent. Government secondary financing or a gift from family or one’s employer can cover 3.5 percent. Streamline Refinance opportunity. Permit Non-Occupying Co-borrower. Competitive interest rate availability. Assumable. Effective permanent requirement that lenders must help borrowers avoid foreclosure. 4

FHA’s Office of Single Family Housing 5 Purchase and rehabilitate with one low-cost loan. Renovation funds are escrowed so work can be done after closing. Modernize, add rooms, new heating or roof, energy improvements, or other real property needs. Limited 203(k) for non-structural work up to $35,000; no consultant required. Loan amount is based on as-rehabilitated value. 203(k) – Purchase or Refinance with Rehabilitation

FHA’s Office of Single Family Housing 6 HFA, local government, family, or employer may cover down payment but employer may not restrict employment as a condition. Other parties can cover closing costs and POCs, but not included in down payment calculations. No combined LTV restriction on purchase with FHA and non-amortizing government second loan. Resale restrictions must dissolve upon foreclosure. Combining FHA with Affordable Seconds or Gifts

FHA’s Office of Single Family Housing 7 FHA Funds Energy Improvements 203(k) can fund energy improvements. Solar, wind, and Energy Efficient Mortgage Improvements can be financed in standard FHA Purchase or Refinance loans and may increase a base loan above statutory maximums. Energy Efficient Homes (EEH) are entitled to higher ratios of debt-to-income in view of presumed utility cost savings. Property Improvement (Title I) Program is a stand-alone loan product that can finance energy improvements: – Unlike home equity loans and HELOCs, there are no Loan-to-Value ratios or credit score restrictions. – No lien is required if the loan is under $7,500. – Maximum loan amount is $25,000 May be up to a 20 year term.

FHA’s Office of Single Family Housing 8 FHA Single Family Priorities Working with the industry participants to enhance business processes, communication, and policy clarity. Making it Easier to Do Business Implementing responsible ways of providing first-time homebuyers and underserved, credit worthy borrowers access to credit to ensure long-term homeownership success. Expanding Access to Credit Balancing our mission with sound lending practices to ensure the health of the Mutual Mortgage Insurance Fund. Ensure Long-term Viability of MMI Fund

FHA’s Office of Single Family Housing 9 Responsibly providing first-time homebuyers and underserved, credit worthy borrowers access to credit to ensure long-term homeownership success through: Housing Counseling Single Family Housing Policy Handbook Quality Assurance Framework Expanding Access to Credit

FHA’s Office of Single Family Housing 10 Source: HUD Increased Affordability Translates into Increased Access to Credit - ½ Percentage Point Reduction in the Annual MIP Premium….. 1.Based on average loan size of $180,000 Saves $900 annually for an average household. 1 Saves $2-$3 billion for these households. Benefits 2-3 million households over the next 3 years. Nearly 250,000 additional creditworthy, responsible families will be able to afford to buy over the next 3 years. 1.Based on average loan size of $180,000

FHA’s Office of Single Family Housing 11 FHA Single Family Purchase & Refinance Loans in Pennsylvania Standard - 203(b)Reverse (HECM) - 255Rehabilitation - 203(k) Loans Mortgage AmountLoans Mortgage AmountLoans Mortgage Amount ,707 $7,050,396,676 2,637 $457,795, $122,102, ,402 $7,622,413,331 2,842 $507,458, $125,207, ,030 $3,927,170,484 2,312 $423,533, $104,689, ,175 $5,796,760,509 2,237 $430,381, $118,139,765

FHA’s Office of Single Family Housing 12 FHA Purchases and Access to Credit Source: FHA Home Mortgage Insurance Division FHA Share of Portfolio: First-Time Homebuyers LAST REVIEWED: 8/28/15

FHA’s Office of Single Family Housing 13 Housing Counseling and Education Networks funded and overseen by HUD. Enables families underserved by the current mortgage market to achieve sustainable homeownership. Enables all consumers to make better housing choices. Prevents foreclosures of defaulted loans. When provided before purchase, reduces default rates. Provides value added to mortgage and real estate industries. Will be promoted in an upcoming FHA marketing campaign for consumers and the Housing industry to raise awareness of the value added and to mainstream usage.

FHA’s Office of Single Family Housing 14 FHA’s Single Family Housing Policy Handbook (SF Handbook; HUD Handbook ) is a consolidated, consistent, and comprehensive single source for FHA Single Family Housing Policy: Consolidated: Eventually, all SF Mortgagee Letters, Housing Notices, Handbooks, and other policy documents will be consolidated into a single source. Consistent: Consistent format and terms throughout the SF Handbook support easier use – a key to FHA’s Access to Credit strategy. Comprehensive: The SF Handbook will cover all Single Family Housing policy. SF Handbook Overview

FHA’s Office of Single Family Housing 15 Online SF Handbook Online version of FHA’s SF Handbook Resides on AllRegs® electronic policy platform Fully searchable (keyword, etc.) Free access to site via link on HUDCLIPS Access the link on HUDCLIPS at: istration/hudclips/handbooks/hsgh.

FHA’s Office of Single Family Housing 16 Doing Business with FHA section: Includes Title I Lender and Title II mortgagee approval and eligibility requirements, post-approval policies and annual re- certification requirements. Other subsections in progress. Origination through Endorsement section: Contains policies and requirements from borrower application, to underwriting and processing, and through to obtaining an FHA insurance endorsement for the majority of FHA Title II forward mortgage products and programs. Servicing and Loss Mitigation section: published in June, effective March 14, Consolidates existing servicing guidance in over 220 handbooks, mortgagee letters and other policy documents. Includes policies on defaults, mitigation, and Servicer Tier Rankings. Quality Control, Oversight, and Compliance section: contains policies and requirements for institution and loan level quality control; FHA’s monitoring activities; and actions FHA may take against mortgagees and its employees, and other individuals and program participants. Key Sections of the Consolidated SF Handbook

FHA’s Office of Single Family Housing 17 Doing Business – Other Participants (certain subsections); Claims and Disposition; Title I; Home Equity Conversion Mortgages; and Quality Control, Oversight, and Compliance – Other Participants (certain subsections). SF Housing Policy Handbook: Sections Still to Come Last Reviewed: 8/19/15

FHA’s Office of Single Family Housing 18 Quality Assurance Framework FHA wants to: Provide clear rules of the road. Encourage responsible behavior. So lenders can: Originate loans with confidence. Focus on the quality of their processes and lend to all qualified borrowers.

FHA’s Office of Single Family Housing 19 1 The terms “Unacceptable” and “Deficient” refer solely to the code names used by FHA in its previous QA systems and practice and should not be extrapolated to any other context or for any other purpose. Because these terms could be open to a variety of interpretations and do not provide the level of specificity desired by FHA, they are being replaced under the Taxonomy with Tier labels. Loan Quality Assessment Methodology (Defect Taxonomy) This Taxonomy represents an evolution in FHA’s approach to Quality Assurance.

FHA’s Office of Single Family Housing 20 Lender Performance Management Supplemental Performance Metric compares lender performance to an FHA risk mix and default rate.

FHA’s Office of Single Family Housing 21 Balancing our mission with sound lending practices to ensure the health of the Mutual Mortgage Insurance Fund. Ensure Long-term Viability of MMIF

FHA’s Office of Single Family Housing 22 HECM in Transition: Program Sustainability Reduce risk to the MMI Fund: – Product structure (fixed-rate products/large draws at close); and – Taxes and Insurance defaults. Sustainable solution for the borrower: – Ability to meet requirements of the loan; and – Long term access to equity to support ability to age in place vs. use of program as a crisis management tool. Non-Borrowing Spouses. Reputation Risk: Marketing and Sales Practices. Loss Mitigation and Due and Payable Servicing Guidance.

FHA’s Office of Single Family Housing 23 Working with industry participants to enhance business processes, communication, and policy clarity. Making it Easier to Do Business 23

FHA’s Office of Single Family Housing 24 Making it Easier to Do Business with FHA FHA SF Handbook – create a single authoritative source for FHA Single Family policy. Implement broader use of e-Signature policy. Business Transformation – implement new capabilities and move some systems to a new technology platform: – Electronic Appraisal Delivery Portal: Improve access to data earlier in the process to improve risk management and to minimize paper. – Lender Electronic Assessment Portal: Enable FHA to better identify, mitigate, and manage risk; automate and replace manual processes. – E-Case Binders – Electronic Appraisal Delivery portal is first step towards a portal enabling lenders to transmit entire case binder to HUD electronically. – Leverage industry data standards where possible (MISMO, etc.)

FHA’s Office of Single Family Housing 25 Phone: Monday-Friday, 8 a.m. to 8 p.m., ET. Toll Free: (800) CALL-FHA or (800) answers : Qs and As addressing 90% of our phone calls and announcements of policy changes and training opportunities. answers FHA INFO s: Frequent notifications of new policies and training opportunities for any one who signs up. Getting Information About FHA: The FHA Resource Center