HUD DEBUTS TWO HOME PURCHASE PROGRAMS

ANCHORAGE - The U.S. Department of Housing and Urban Development recently developed and released two new Federal Housing Administration (FHA) programs to help homebuyers -- the Streamline(K) program and a five-year adjustable rate mortgage program with an annual cap of two percent and a life of loan cap of six percentage points.

The Streamline(K) Limited Repair Program was created to help homebuyers finance minor rehabilitation work identified in a home inspection or in the FHA appraisal. That program will be available in Alaska June 5, 2005. The Streamline(K) program is a modification of the Departments 203(k) program, which has been FHAs primary tool for providing insured mortgage financing for the purchase of single-family properties in need of rehabilitation.

The Streamline(K) program is intended to assist homeowners with basic repairs costing between $5,000 and $15,000. Unlike the standard 203(k) program, any FHA approved mortgagee may originate a Streamline(K) mortgage. The mortgage amount will allow for purchase of the property and up to $15,000 in the loan proceeds to be applied
toward repair/rehabilitation of the property. This can include roof and gutter replacement or repair, repair or upgrade of existing HVAC systems, repair or replacement of existing flooring or plumbing and electrical systems, etc. Repairs have to comply with all local codes and ordinances, and the borrower, in most cases, must use a contractor to
make the repairs or upgrades.

The hybrid program allows FHA to insure five-year adjustable-rate mortgages (ARMs) with an annual cap of two percentage points and a six percent cap over the life of the loan. FHA created this program in answer to requests from homebuyers, lenders and the secondary mortgage market. This hybrid adjustable comes with a three percent downpayment and a $312,895 maximum mortgage amount. It also allows first-time homebuyers to lock in a relatively low fixed rate for the initial five years of the mortgage. After that time, buyers can keep the loan, if they choose, knowing the annual rate adjustments (if the market rates rise) are limited. Hybrids with three-, seven-, and 10-year initial fixed-rate periods also are available.

HUD also has introduced new financial incentives for FHA-approved lenders to help delinquent owners keep their homes and avoid foreclosure through forbearance agreements or loan modifications. These consumer protections are rare with many subprime lenders that have few, if any, financial or legal incentives to work with borrowers who are behind on their loans.

HUD is the nation's housing agency committed to increasing homeownership, particularly among minorities; creating affordable housing opportunities for low-income Americans; and supporting the homeless, elderly, people with disabilities and people living with AIDS. The Department also promotes economic and community development as well as enforces the nations fair housing laws. More information about HUD and its programs is available on the Internet and espanol.hud.gov.

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