The proposed program could be improved by simplifying communications with borrowers and making changes that expand the number of borrowers who can be helped, industry and consumer groups said.
Allowing lenders to provide downpayment assistance on FHA loans would extend homeownership to underserved borrowers who have a difficult time amassing even a 3.5% downpayment, the former Ginnie Mae president said.
Lenders have new obligations to the FHA when they default on making home equity conversion mortgage disbursements, according to a policy finalized this week.
The Department of Housing and Urban Development will require lenders to use a Supplemental Consumer Information Form for all FHA Title II single-family home mortgages they originate beginning in August.
Under FHA’s proposal, participating servicers would receive $1,000 in compensation, but the Urban Institute said that personnel costs would often be higher than that.
Under the modified policy, FHA decreased the minimum loan balance threshold at which a mortgagee can submit the assignment request for a home equity conversion mortgage.
The success of the Section 203(k) program depends on reforms that would make it more accessible for borrowers and operationally feasible for lenders, according to the Mortgage Bankers Association.
The Mortgage Bankers Association wants FHA to extend to all lenders certain documentation waivers recently made available to Reverse Mortgage Funding transferees.
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