... must be full creditqualifying rate and term ... Nontr

1

• FHA Risk-Based Premiums
• Industry Conference Call
• June 3 5, 2008

2

• Risk-Based Premiums
• Timing for Premium Change
• Determining Correct Premiums
• Additional Guidance / Areas of Confusion
• Rationale for Premium Change
• Opportunity for Questions Answers

3
(No Transcript)
4

• Implementation Schedule
• Effective date July 14, 2008
• All FHA business not just FHASecure
• All loans for which case numbers assigned on or
  after July 14, 2008
  

5

• FHA to Provide Premiums
• For purchase/rate term and cash-out refis,
  feedback message via AUS
  
• For streamlined refis, feedback on case number
  assignment screen
  
• Lender can use published matrix to determine
  premiums
  

6

• What Products and Property Types
• Purchase and Refinance Transactions
• Multi-unit properties
• No add-ons for property type
• Lower premiums for 15-year term loans

7

• Premiums for Previously Delinquent
• 225 basis points up-front premium
• 50 bps annual premium if LTV
• 55 bps, if 95 LTV
• Not eligible for strealine refinance
• Refinance must be full credit-qualifying rate and
  term refinance
  
• Higher CLTV FHASecure NOT subject to higher
  premium

8

• Change to Insurance Premium Only
• No change to FHA underwriting standards only
  change is premiums charged
  
• Must use TOTAL Scorecard generated credit score
  is factor to determine premium
  
• Some additional Accepts/Approves (reduced Refers)

9

• Final Notice Addresses Comments
• LTV rather than downpayment
• Type of downpayment is not a factor for premium
  charge
  
• Non-traditional credit borrowers have high LTV
  option
  
• Decision credit score consistent with industry

10

• Credit Scores Multiple Borrowers
• Must use TOTAL Scorecard
• If borrower has score, premium based on score
  (not eligibility)
  
• If two borrowers, use lowest score
• If one of borrowers has non-traditional credit,
  use lower of two pay higher premium
  
• If one of borrowers falls into ineligible
  category, FHA cannot insure
  

11

• Manual Downgrades/Disputed Credit
• If relevant information excluded from credit
  report results in downgrade, borrower still pays
  premium based on generated score
  
• If consumer disputes accuracy of report
• Consumer may work to repair
• Consumer may pay premium based on published
  score
  

12

• Streamlined Refinances
• Existing loans - case numbers before July 14th
  (borrower paid 150 bps)
  
• StrRefi case number before July 14 150 bps
• StrRefi case number after July 14 100 bps
• New loans - case numbers after July 14th
  (borrower pays risk-based premiums)
  
• StrRefi (case number after July 14) with no new
  credit use original credit score and LTV
  
• If credit qualify use new credit score, old LTV

13

• Streamlined Refinances
• Case number assignment screen will feed back
  message with appropriate premium to be charged
  
• FHASecure borrowers who were previously
  delinquent are NOT eligible for a streamlined refi

14

• Counseling to Reduce MIP
• Borrowers with 95 LTV and 500 559 credit
  score
  
• Upfront MIP reduced from 225 to 200
• Counseling from HUD-approved HCA
• Prior to execution of sales contract
• One-on-one
• Face-to-face, with some exceptions
• Certificate will indicate counselor compliance
  with requirements

15
(No Transcript)
16
FHA Single Family Claim Rates
Claim rates - 1 - 7
Claim rates - 8 - 12
Claim rates - 13 - 16
Claim rates - 17 - 20
Claim rates 21 - 25
Claim rates above 25
17
Risk-Based Premiums
18
FHA Borrower Profile

• Lower income borrowers w/higher credit scores and
  high LTVs majority
  
• 23 of borrowers credit scores are 680-850
• 50 of borrowers have credit scores above 620

19
Status Quo Is Not an Option

• No premium changes, FHA requires 1.4B in FY09
  appropriations
  
• Premium increase to 225 across-the-board, FHA
  requires 607M in FY09 appropriations

20

• Questions

21

• Concluding Remarks