Tuesday, June 17, 2014 - Article by: Justin Fitzhugh - Nations Lending Corporation -
The Department of Housing and Urban DEvelopment, HUD, is asking for input on its proposed pilot program Homeowners Armed With Knowledge, HAWK. HUD is looking to research and develop a counseling model that effectively reduces FHA insured mortgage defaults, helps to increase credit availability for underserved home buyers while institutionalizing a working foundation for sustainable home mortgages, and increases the number of families who are equipped with budgeting skills and are able to make sound housing decisions. The program would be available to first time home buyers. Participants would be expected to receive housing counseling services before and after they close the purchase of their home; and they would benefit with a one-time 50 basis points reduction of the upfront mortgage insurance premium, MIP, and two permanent reductions, 10 basis points, and an additional 15 basis points, of the annual insurance premiums (read below for details on how these would apply). The agency aims to promote a culture in which first time home owners are able to manage their finances, evaluate housing affordability and mortgage alternatives, and understand their rights and responsibilities as home owners.
Homebuyers who complete counseling before they close the financing of their purchase would receive a one-time 50 basis points reduction in their upfront FHA insurance premium, and a permanent 10 basis points on their annual premiums.
Homebuyers who complete post-closing counseling, and avoid incidences of 90 day delinquencies during the first 18 months would receive an additional permanent reduction of 15 basis points on their annual insurance premiums. The discount would apply on the 25th month from closing. The agency estimates homeowners could save up to $325 a year on insurance premiums, nearly $10,000 over the life of the loan.(1)
HUD reserves the right change the structure of these benefits.
Program participants would be expected to pay for housing counseling fees. HUD estimates an average of $300 for pre-contract counseling, $100 for the pre-closing counseling, and $100 for post closing counseling. FHA expects that the MIP reductions benefiting the borrower will offset any costs of HAWK counseling and education paid by the borrower. Grants may be available to counseling agencies who wish to subsidize the costs of offering counseling associated with this program.
THE COUNSELING AGENCIES
Participating agencies would be required to get approval from HUD, and would be require to adhere to prescribed counseling guidelines.
PARTICIPATING LENDERS AND SERVICERS
Lenders who wish to close FHA loans under this program would be required to pay for the borrowers counseling. Loans closed under this program would need to be adjusted to reflect the MIP discounts as described before.
I think this is a very interesting program, and I am impressed at the Agencys proactive approach. HUD has identified a common shortcoming of first time home buyers, and it aims to tackle the problem at the source, ignorance. I think that promoting a culture of learn before you take on a responsibility will benefit society at large, and well, first and foremost the FHA and the borrower. The discounts that program participants may get remind me of the discounts teenager gets if they attend driving school before getting the DL.
Here you can read commentary submitted by others, or submit your own: https://www.federalregister.gov/articles/2014/05/15/2014-11152/federal-housing-administration-fha-homeowners-armed-with-knowledge-hawk-for-new-homebuyers#h-10
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