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What's New
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HUD
announces no downpayment 203(h) mortgages for hurricane disaster victims
Secretary Alphonso Jackson announced on 10/12/05 that HUD has a 203(h) mortgage
financing program that requires no downpayment for people whose homes have been
destroyed or damaged due to Hurricanes Katrina or Rita. In addition to requiring
no downpayment, potential homeowners can live anywhere they choose in the United
States. More...
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Summary:
The Section 203(h) program
allows the Federal Housing Administration (FHA) to insure mortgages made by qualified
lenders to victims of a major disaster who have lost their homes and are in the
process of rebuilding or buying another home.
Purpose:
Through Section 203(h), the
Federal Government helps victims in Presidentially designated disaster areas recover
by making it easier for them to get mortgages and become homeowners or re-establish
themselves as homeowners.
Type of Assistance:
This program provides mortgage insurance
to protect lenders against the risk of default on mortgages to qualified disaster
victims. Individuals are eligible for this program if their homes are located
in an area that was designated by the President as a disaster area and if their
homes were destroyed or damaged to such an extent that reconstruction or replacement
is necessary. Insured mortgages may be used to finance the purchase or reconstruction
of a one-family home that will be the principal residence of the homeowner. Like
the basic FHA mortgage insurance program it resembles (Section
203(b) Mortgage Insurance for One- to Four-Family Homes), Section 203(h) offers
features that make homeownership easier:
-- No downpayment is required. The
borrower is eligible for 100 percent financing. Closing costs and prepaid expenses
must be paid by the borrower in cash or paid through premium pricing or by the
seller, subject to a 6 percent limitation on seller concessions.
-- FHA mortgage
insurance is not free. Mortgagees collect from the borrowers an up-front insurance
premium (which may be financed) at the time of purchase, as well as monthly premiums
that are not financed, but instead are added to the regular mortgage payment.
-- Some fees are limited. FHA rules impose limits on some of the fees that
lenders may charge in making a mortgage. For example, the lender’s mortgage origination
charge for the administrative cost of processing the mortgage may not exceed one
"point"—that is, one percent of the amount of the mortgage excluding any financed
upfront mortgage insurance premium. In addition, property appraisal and inspection
fees are set by FHA.
--HUD sets limits on the amount that may be insured.
To make sure that its programs serve low- and moderate-income people, FHA sets
limits on the dollar value of the mortgage. The current FHA
mortgage limit ranges from $200,160 to $362,790. These figures vary over time
and by place, depending on the cost of living and other factors (higher limits
also exist for two- to four-family properties).
Eligible Participants:
FHA-approved
lending institutions, such as banks, mortgage companies, and savings and loan
associations, are eligible for Section 203(h) insurance.
Eligible Customers:
Anyone
whose home has been destroyed or severely damaged in a Presidentially declared
disaster area is eligible to apply for mortgage insurance under this program.
Application:
The borrower’s application
for mortgage insurance must be submitted to the lender within one year of the
President’s declaration of the disaster. Applications are made through an FHA-approved
lending institution, who make their requests through a provision known as "Direct
Endorsement," which authorizes them to consider applications without submitting
paperwork to HUD. Mortgage insurance processing and administration for this and
other FHA single-family mortgage insurance products are handled through HUD's
Homeownership Centers.
Technical
Guidance:
This program is authorized
under Section 203, National Housing Act (12 U.S.C. 1709, 1715(b)). Program regulations
are in 24 CFR Part 203. These regulations, as well as handbooks, notices, and
letters relevant to this program, are available through HUDCLIPS.
The program is administered by the Office
of Single-Family Housing Programs in HUD’s Office
of Housing-Federal Housing Administration.
For More Information:
Contact
the FHA
Resource Center. Homebuyers can also contact
a HUD-approved lender for a searchable listing of approved lenders nationwide,
a HUD-approved housing counseling
agency, or the toll-free FHA Mortgage Hotline, 1-800-483-7342.