HUD and FHA Overview

Study Notes

HUD

HUD stands for the U.S. Department of Housing and Urban Development, a cabinet-level agency of the U.S. government.
The secretary of HUD is appointed by the President and is part of the presidential cabinet.
HUD oversees the FHA mortgage insurance program, public housing programs, urban renewal efforts, and enforces fair housing laws.

FHA

FHA stands for Federal Housing Administration, established in 1934 to provide mortgage insurance to lenders.
The FHA does not originate or purchase mortgage loans; it insures loans against loss for the originating lenders.
In 1965, the FHA became part of HUD, continuing as a government-administered mortgage insurance program.

FHA Insurance

FHA insures loans rather than funding them, protecting lenders against losses.
Seller closing cost assistance is capped at 6% of the purchase price or appraised value.
Cash to borrowers at closing is prohibited; a minimum down payment of 3.5% is required for borrowers with credit scores of 580 or higher.

Structure of FHA

Four Homeownership Centers support different regions across the country.
Locations include Philadelphia, PA; Atlanta, GA; Denver, CO; and Santa Ana, CA.

FHA Observation Expectations

Appraisers must determine property compliance with Minimum Property Requirements (MPR) and Minimum Property Standards (MPS).
The observation must cover areas like attics and crawl spaces, with specific observational standards for full access situations.

Documenting the Observations

An appraiser should ask questions like the functionality of bathroom fixtures, presence of windows in bedrooms, operation of light switches, and water heater operational checks to record observations accurately.

Handbook 4000.1 Structure

Handbook 4000.1 is divided into five major sections:
- Doing Business with FHA
- Origination through Post-Closing/Endorsement
- Servicing and Loss Mitigation
- Claims and Disposition
- Quality Control, Oversight, and Compliance

Contractual Responsibility

Appraisers must deliver services per HUD regulations and policies, listing HUD/FHA as an intended user in appraisal reports.
Appraisers face dual obligations: contractual obligations to the mortgagee and legal obligations to their credentialing state, with HUD/FHA maintaining disciplinary authority.

Appraiser and Property Requirements

Handbook 4000.1 details 12 subsections on appraisal standards, covering topics such as:
- Commencement and general requirements for appraisals
- Acceptable reporting forms and protocols
- Property criteria for various housing types, including manufactured housing and leasehold interests.

Eligibility Standards

Mortgagees are primarily responsible for determining property eligibility, while appraisers verify Property Acceptability Criteria and appraised value.
Appraisers must provide both property value opinions and preliminary compliance verifications.

Description

Discover the roles and functions of the U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA). This quiz explores how FHA insurance works and its relationship with HUD. Test your knowledge on key concepts related to housing and urban development.