1. Both the original lender and the borrower have to agree, since both are being affected. As a practical matter, lenders never negotiate with borrowers that are current, so it would most likely apply only to loans that are already delinquent (at least 1 payment late). Lenders could adapt on this one, but given their historical shortsightedness, it’s unlikely.
2. It sunsets at the earlier of the funding of the insurance on the $300 billion or some future date, I think I remember 5 years, though I may have imagined that.
3. FHA loan volume moves as does the market. With the repeal of Glass-Steagal in the 90’s and the related deregulation which lead to the expansion of mortgage lending to non-banks, along with the advent of mortgage backed securities, FHA insured lending all but disappeared in many markets. If this bill passes, they will be back in business. At least until they’re not anymore.
4. Appraisals will have to be brand spanken new, paid for by the borrower/lender and the appraisal will have to be done according to strict FHA guidelines, which are much more strict than traditional underwriting guidelines. (I know, its an oxymoron to call recent customs in the lending industry “guidelines”. The were more like suggestions. The FHA does not operate that way.)
5. FHA geographical lending limits will apply.
6. Unless there has been a modification to the bill since I read it last, no. Borrowers who knowingly presented false loan applications on the loan being renegotiated will not be eligible. How strictly the FHA enforces this clause may well be regulated by the demand for the FHA insurance. Lower demand may dictate more lax interpretation. Higher demand would lead to more strict interpretation. At its most strict, the FHA could deem that any exaggeration on a signed loan app qualifies as “knowingly”. I suspect this clause will greatly diminish any expected benefits of the bill.
