The FHA Modernization Act of 2007

September 20, 2007

As part of Washington's efforts to ease the subprime mortgage crisis, both the House and the Senate are speedily approving compromise legislation to make it easier for consumers to get Federal Housing Administration backed loans.

FHA currently makes fixed rate loans, adjustable rate loans, renovation loans and reverse mortgage loans.

Some of the changes being considered include:

Higher loan limits;

Be available to low and moderate income borrowers;

Reduction of the down payment from the present 3% to 1.5%

Increased mortgage limits for reverse mortgages;

Lower loan origination fees for elderly homeowners: from current 2% to 1.5%;

A new loan product called FHA SECURE for refinancing an adjustable loan.

To qualify for FHA SECURE, eligible homeowners must meet the following criteria:

1. A history of on-time mortgage payments before the borrower's teaser rate expired and the loan reset;

2.Interest rates must have or will reset between June 2005 and December 2009;

3. Three percent cash or equity in the home;

4. A sustained history of employment;

5. Sufficient income to make the mortgage payment.

The FHA loan program began in 1934 with the primary purpose to reach borrowers who were under served and to help them achieve the American Dream of home ownership.