Delinquent Borrower Portion of FHA Secure Going Away Dec. 31st; Other FHA Refinancing Programs Remain.

As I anticipated in a post more than a month ago HERE, the delinquent borrower FHA Secure refinancing program is going away on December 31st. [Less than 1% of FHA refinance loans used this program anyway].

HUD finally got around to confirming this with a MS Word Dec. 19th. Mortgagee Letter (2008-41) HERE.

Another MS Word Mortgagee Letter (2008-40) HERE issued just before the announcement of the ending of the delinquent borrower FHA Secure program clarifies new calculations of maximum mortgage amounts for remaining FHA refinancing programs.

A two page MS Word table attachment to Mortgagee Letter 2008-40 HERE provides a side by side comparison of maximum LTV's for various FHA refinancing scenarios and confirms that Conventional to FHA refinances will have a LTV limit of 97.75%

How Much Can Oregon Families Save By Refinancing Out of a Subprime ARM Loan?

Typo Correction: Changed to read "Oregon has not adopted a bond refinancing program."

I have developed a new Excel workbook that illustrates potential savings for families that refinance from a current Oregon subprime ARM loan. Each worksheet shows an example of savings for one family and then for a select number of total families by month, year, and 30 year term of mortgage. IMPORTANT notes are included at the bottom of each worksheet.

There are two worksheets in the workbook:

• 1st compares savings using Oregon bond rate vs current average subprime ARM rate for Oregon.[Oregon currently has not adopted a bond refinance program using the special $117 million in housing bonds allocated to Oregon by the summer 20O8 federal housing legislation, but is considering adopting such a program].
  
• 2nd worksheet compares savings using current FHA Secure refinance rate for Oregon vs. current average subprime ARM rate for Oregon.

Using Current Interest Rate Differentials, Savings from Refinancing out of an Oregon Subprime ARM are Potentially Very Large :

• Savings using FHA Secure are $3,158 a year, $3.158 Million a year for 1,000 families
• Savings using Oregon Bond [if program was already available] would be $5,203 a year, $5.203 Million a year for 1,000 families.

[My earlier post with estimates of future Oregon subprime and ALT-A ARM loan resets is HERE.]

PDF of workbook with examples I used is HERE.
Excel workbook is HERE. I have not copy protected any cells, so you can change selections I made (I suggest you save the original someplace so you can get back to original if necessary; I.E.--if you screw it up!).

Additional notes:
1. I used actual average Oregon FHA Secure rates and Oregon Subprime average ARM interest rates as of October 2008.
2. I use the actual current Oregon bond rate as of today.
3. I do not play around with future ARM rates, just assume that current average subprime ARM rate would continue for life of loan.
4. Lead example in each spreadsheet uses the current interest rate difference. Each worksheet includes two other scenarios with rate differential reduced by 1/2% in each scenario

Oregon FHA Loans in Past 12 Months: More than 13,300; $2.77 Billion.

I have updated the Oregon FHA Current Snapshot Report in the right pane. The report covers the last 12 months, November 2007-October 2008.

Loan counts and dollars for each county for each of the last 12 months are available, with separate sections for 1. All loans [except HECM's], 2. All refinances, and 3. FHA Secure refinances (FHA Secure loan data is only available for the 7 months from April-October 2008).

Highlights of the Report:

Past 12 Months Data

• Purchase and Refinance Totals: 13,379 loans; $2.77 Billion.
• All Refinance (includes refinances for both existing conventional and FHA loans): 7,026 loans;$1.48 Billion

Past 7 Month Data for FHA Secure Loans [These are FHA refinances of previously conventional loans].

• 4,563 loans; $987.9 Million.
• Only about 1% of these refinances of conventional loans were for delinquent borrowers
• FHA Secure data elements are only available for the last 7 months.

Past Month Data (October 2008)

• Total FHA Loans: 1,935; $410.5 Million
• Total FHA Refinance Loans: 868; $187.3 Million
• Total FHA Secure Loans: 792; $173.4 Million

I Think Only Tiny Portion of FHA Secure Program Set to Terminate Dec. 31st.

FHA Secure originally was focused on delinquent conventional loan borrowers who were refinancing into a FHA loan. The number of these loans that have been completed is tiny. This program also carried a higher mortgage insurance premium, reflecting the higher risk of the program.

Somewhere along the line the term FHA Secure was expanded by HUD to include any conventional loan being refinancing into a FHA loan. That program has gone gangbusters.

(Data on each program for recent months at the state level is available from my US Current FHA Refinancing Report in the right pane of the blog; note that FHA Secure data only started to become available in April 2008).

I Think that Only the Tiny [Delinquent Borrower ] Part of FHA Secure is Scheduled to Go Away Dec. 31 st.
After reading several documents my conclusion is that the only program set to expire on December 31st is the original FHA Secure program for delinquent borrowers and NOT the FHA Secure program for conventional borrowers who want to refinance into a FHA loan.

Despite the small size of FHA Secure program for delinquent borrowers I expect that consumer and lending groups will seek an extension.

HUD Needs to Clarify
Hopefully, HUD and FHA will get around to clarifying this with some kind of communication like a mortgagee letter. (Like some additional details I could be missing).

National FHA Refinancing Activity In Last 6 Months Tops $50 Billion.

I have posted an update to the U.S Current FHA Refinancing Report in the right pane of the blog; it includes state totals, as well as the U.S total. Highlights for the six months from April-Sept 2008:

1. All FHA Refinance Loans: More than 283,000 families refinanced using FHA mortgage insurance--FHA refinances were more than $50 Billion.
2. FHA Secure Refinance Loans: FHA Secure loans are refinances from conventional to FHA loans [Many of these were likely subprime ARM loans].

• More than 226,000 families refinanced using FHA Secure Loans; total loan volume was more than $41 Billion.
  
• Of those 226,000 loans less than 1% had delinquent borrowers (2,284 loans).
  
• FHA Secure loans represented 82% of all FHA refinances.