HUD Programs Overview
Since its inception in the 1960s, the United States Department of Housing and Urban Development has been involved in a range of housing issues, from apartments and public housing to community redevelopment to fair-housing practices for minorities, people with AIDS and the disabled. In the wake of the real estate bust of the late 2000s, HUD programs have stepped in at a few new levels:
RESPA: The Real Estate Settlement Procedures Act is one of the HUD programs that were devised to help protect homebuyers from abusive lending practices. Some of the points it addresses:
- Full disclosure at time of loan application, including a good-faith estimate of settlement/closing costs, loan-servicing information, and a statement of various settlement options
- Full disclosure before closing occurs. This will cover any third-parties involved in the settlement, and a HUD-1 form that will ask for a complete cost breakdown of settlement.
- Full disclosure at settlement. The HUD-1form will show actual costs of settlement, and an escrow statement will show an itemized breakdown of how escrow money will be spent (insurance, taxes, other costs).
- Full disclosure after settlement. An itemized escrow statement will be delivered to the borrower after every calendar year, and the borrower must be notified if his mortgage goes to another servicer.
The RESPA is also designed to prevent abuses like kickbacks, fee-splitting and excessive payments into escrow (escrow accounts draw interest for the lender).
Making Homes Affordable Act: Passed by the Obama administration, Making Homes Affordable is aimed at helping homeowners with troubled loans rework or restructure their mortgages. It also takes aim at unscrupulous lenders and the growing number of foreclosure bailout scams, alerting financial institutions to the “red flags” that might indicate a scam (such as insisting on an up-front payment to start the ball rolling on a mortgage workout).
Good Neighbor Next Door: The Good Neighbor Next Door Act helps revitalize neighborhoods block-by-block, by giving preference to police officers, firemen, nurses, teachers and other public servants in the loan process. Incentives include up to a 50% discount on the sale price of HUD homes.
Foreclosure: HUD-certified counselors are available for those in the foreclosure process, ready to give useful information to help troubled homeowners and act as a go-between with the lender.
HUD homes: On the occasions when HUD forecloses on a home, the house is put up for sale at auction. Partnered with FHA financing, the HUD housing program for homebuyers offers concessions for a buyer looking for a primary residence, including easier credit requirements and down payments as low as $100.
HOPE NOW: Obama’s most recent HUD housing program, the HOPE NOW initiative, is an alliance between HUD-certified housing counselors, mortgage companies, investors and other players in the mortgage market to help with workouts and restructuring of loans for those facing foreclosure. This HUD housing program is still in its early stages and has yet to make much of a dent in foreclosures.