Unformatted text preview: es even more attractive and was the birth of the secondary market as we know it today. The advent of Fannie Mae allowed lenders to sell mortgages that met the insurance requirements of FHA. It must be remembered that FHA is not a lender. It does not make loans. FHA issues an insurance policy on loans that meet the underwriting requirements of the National Housing Act. This insurance policy ensures the lender that if the loan goes into default, FHA will make the loan good by taking the property and paying off the lender either in cash or with debentures guaranteed by the United States government.
5-20 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 5: GOVERNMENT PARTICIPATION & BACKED LOANS
FHA does appraise the property, and if the property is under construction, it can inspect the property throughout construction. In addition to the appraisal and approval of the property, FHA will approve the borrower. If the property and the borrower meet the underwriting requirements, FHA will insure the loan. The insurance issued by FHA is called mutual mortgage insurance, and FHA now charges either one–half of 1 percent per annum on the unpaid balance or a one–time lump sum, either paid as a lump sum at closing or financed as part of the loan. This charge is referred to as MIP, or the mortgage insurance premium. This insurance should not be confused with any other type of insurance, such as mortgage payment insurance carried on the borrower. The FHA insurance protects the lender from loss. Since HUD–FHA was founded to serve all of the United States, the headquarters is in Washington, DC. The United States has been divided into ten regions and these regions have further been divided with the establishment of area offices to make FHA more responsive to the needs of the different areas of the country. It should be noted, however, that in the recent past funding for these programs has been inhibited. Lack...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10