Transfer of Insurance The Secretary would be authorized to transfer the insurance of any loan to any approved lender which purchases such loan. Title IV. Home Mortgage Insurance Basic Insurance Program All unsubsidized home mortgages would be insured under one authority with uniform statutory terms. Home mortgages would cover one-to-four family dwellings and one-family condominium units. This program is intended to serve the functions now spread over approximately fifteen authorities contained in the National Housing Act. It is not intended, however, that all the benefits and all the restrictions of the existing Act be perpetuated. The proposed Act is based on the premise that major housing goals can be pursued more effectively if the complexity and rigidity associated with specific and detailed narrow-purpose provisions can be avoided. Maximum mortgage amount - Existing programs impose flat dollar limits on the maximum insurable mortgage which vary among programs, ranging, for a single-family unit, from a low of $14,400 to $33,000. No dollar limits are contained in the proposed Act, but limits would be established administratively in each area. Maximum loan-to-value ratios under existing programs vary from a low of a flat 75 percent to a flat 100 percent (up to the maximum mortgage amount of $24,000 for a single-family unit under the particular program). The basic home mortgage insurance program under the National Housing Act one for (section 203 (t)) contains four separate loan-to-value formulas nonveterans, one for veterans who purchase single-family homes, one for new homes of nonveterans which have not been inspected prior to the beginning of construction, and one for new single-family homes of veterans which have not been inspected prior to the beginning of construction. The new Act provides one maximum loan-to-value formula which approximates the more advantageous ratios under existing law. The principal obligation of any unsubsidized home mortgage could not exceed 100 percent of the first $20,000 of the appraised value of the house, 90 percent of the value between $20,000 and $30,000, and 80 percent of the value over $30,000. It is recognized that there is an inconsistency in having flexible maximum mortgage amounts and a loan-to-value formula with fixed dollar terms. It is intended that some experience be developed with the flexible mortgage limit procedure and its relation to the proposed loan-to-value ratio before additional innovations are recommended. The special formula to determine the mortgage amount which is contained in existing law to encourage rehabilitation of homes in certain areas and situations would be retained, to be applied in the discretion of the Secretary. In place of applying the loan-to-value ratios to appraised value after rehabilitation, the ratios could be applied to the sum of the value of the property before rehabilitation plus the cost of rehabilitation, and the mortgage commitment could be used to obtain temporary financing for the rehabilitation. Unlike existing FHA practice it is intended that the amount of closing costs not be included in the appraised value, thus rendering closing costs a separate item to be paid by the buyer. As a result, the buyer should be made more aware of the costs for settlement services which he must pay and possible confusion as to the meaning of FHA "appraised value" should be avoided. The reductions in loan-to-value ratios applicable under existing law to new homes for which the builder haaviot requested FHA Finfamenog priar to construction would be retained, in,modifiediformitorprovide vá larger reduction than under existing law. The purpose of these provisions is to protect prospective home owners from purchasing defective homes by inducing builders to apply for mortgage insurance prior to the beginning of the construction in order to permit FHA inspection of the construction. It should be recognized that the proposed single loan-to-value ratio is a maximum ratio, and that it cannot be expected that mortgages involving high-risk types of property (such as vacation homes) would receive the benefits of the maximum loan-to-value ratio, unless a special social need exists. Minimum downpayment - The minimum statutory downpayment for existing home mortgage programs varies from program to program and within a program on th basis of the status of the mortgagor and ranges from zero to 3 percent of acquisition cost. However, in cases where no downpayment is required by statute, a $200 downpayment is administratively imposed. The amount of the actual downpayment in any situation depends on the extent to which the sales price plus closing costs exceeds the mortgage amount, as a result of the operation of loan-to-value ratios, mortgage amount limits, further restrictions imposed by lending institutions, and sales prices in excess of FHA appraised value. The minimum downpayment under proposed law is an amount equivalent to the closing costs applicable to the transaction, but in any case in which closing costs were less than $200 a minimum downpayment of $200 would be administratively imposed. Although closing costs presently vary from area to area, their use to define the minimum downpayment follows from their exclusion from appraised value. Terms The statutory maximum term of home mortgages under existing programs ranges between 30 and 40 years (limited in all cases to 3/4 of the remaining economic life of the property). No specific maximum term is provided under proposed law. As is the case with multifamily mortgages under both existing and proposed law, maximum terms would be determined administratively by the Secretary. Other provisions include: - Provisions of existing law which would be retained (1) A reduction in the otherwise authorized mortgage amount by 15 percent in the case of a non-occupant mortgagor, unless the mortgagor is called into military service, the mortgage covers experimental property, the owner commits himself to sell the property to an occupant-owner within approximately 18 months after the completion of construction. (2) A requirement that the mortgagor receive a written statement of the FHA appraised value of the property. (3) A requirement that the builder of new homes, approved by FHA prior to construction, provide a one-year warranty to the mortgagor against substantial deviations from approved plans and specifications. Homeownership Assistance Unlike the basic home mortgage program, which consolidates numerous existing programs, the proposed homeownership assistance program is essentially a revision of one existing program (section 235 of the National Housing Act). Significant changes have been made with respect to income limits, maximum mortgage amounts, eligible properties, and downpayments. No changes would be made with respect to maximum subsidy, homeowner's income contribution, and definition of income. - Maximum subsidy The maximum subsidy under existing law is equal to the difference between the monthly payment due under the mortgage for principal, interest, and mortgage insurance premium and the mortgage payment for principal and interest that would be due under a mortgage bearing interest at one percent. No change is made in the maximum subsidy by proposed law. |