What Is HUD?

What is HUD? HUD is Housing and Urban Development and it oversees the Federal Housing Administration programs which got started back in the 30s. HUD is Housing and Urban Development and it oversees the Federal...

HUD is Housing and Urban Development and it oversees the Federal Housing Administration programs which got started back in the 30s. Essentially, every buyer who goes through FHA and pays a monthly insurance premium called MIP which goes into a pool of money. If there is a default and the lender loses money, they will reimburse the lender with that money. The advantage of FHA is that they are more lenient with credit scores than the conventional lenders. Someone who doesn't have a perfect credit score can get very favorable interest rates whereas if they went on what we call conventional loan, they wouldn't be able to. The Department of Veteran Affairs (DVA) oversees the veterans' loans, but that's an advantage to a veteran and both of those loans made by local lenders on the primary side. On the secondary market they are purchased by Fannie May or Freddie Mac; those are independent companies that provide funding. Your local bank might take a million dollars and make ten $100,000 loans and they are out of business. So they will sell them to Fannie May or Freddie Mac and get their million dollars to make more loans and then we have got this company that issues mortgage pack securities. So Fannie May has been dedicated to helping people get into housing across the United States. So they write policies that allow people with less than sterling credit, and first time buyers to get houses.

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