About Government Refinance and Home Purchase Programs

FHA loan limits should officially be higher by tomorrow morning. Breaking news story here.

The Senate moved quickly to revamp and pass the economic stimulus bill. The House promised to rush it to the President for signing. When it is signed FHA loan limits will dramatically increase opening the door for millions of Americans who formerly did not qualify to get FHA loans. See the AP story here.

The Senate Democrats took the stimulus package that White House and House of Representatives sent over and tried to sweeten the pot before passing the bill. The problem was it got too sweet for the tastes of the cost-conscious Senate Republicans who left the expanded bill a few votes short of passing in a vote yesterday. Here is an excerpt from an AP report on the issue:

WASHINGTON – The fate of $600-$1,200 rebate checks for more than 100 million Americans is in limbo after Senate Republicans blocked a bid by Democrats to add $44 billion in help for the elderly, disabled veterans, the unemployed and businesses to the House-passed economic aid package.

GOP senators banded together Wednesday to thwart the $205 billion plan, leaving Democrats with a difficult choice either to quickly accept a House bill they have said is inadequate or risk being blamed for delaying a measure designed as a swift shot in the arm for the lagging economy.

The tally was 58-41 to end debate on the Senate measure, just short of the 60 votes Democrats would have needed to scale procedural hurdles and move the bill to a final vote. In a suspenseful showdown vote that capped days of partisan infighting and procedural jockeying, eight Republicans — four of them up for re-election this year — joined Democrats to back the plan, bucking GOP leaders and President Bush, who objected to the costly add-ons.

Democrats choreographed the vote for maximum political advantage, presenting their aid proposal as a take-it-or-leave-it proposition for Republicans and calling back their presidential candidates to make a show of party unity behind their stimulus plan. They calculated that Republicans would pay a steep price for opposing rebates for older Americans and disabled veterans, as well as heating aid for the poor, unemployment benefits and a much larger collection of business tax breaks than the House approved.

Even after their effort fell short Wednesday, Democrats seemed determined to keep the pressure on Republicans to accept the measure, threatening to hold more votes on it in the coming days.

Majority Leader Harry Reid, D-Nev., is “going to give Republicans a chance to reconsider their vote against efforts to strengthen the economy by helping those who need it most,” his spokesman, Jim Manley, said Wednesday night.

It should be noted that the FHA reform aspect of the Senate bill is the same as the House bill. The disagreements are over things like rebates to all Americans.

The senate is working on their version of the economic stimulus package. It looks like good news so far for homeowners because they are not proposing any changes to the House suggestions. Here are some highlights from a recent AP article:

HOUSING RESCUE

House: Allow more subprime mortgage holders to refinance into federally insured loans by raising the limit on Federal Housing Administration loans from $362,790 to as high as $729,750 in expensive areas. Increase the availability of mortgages by providing a one-year increase in the cap on loans Fannie Mae and Freddie Mac may buy, from $417,000 up to $729,750 in high-cost markets. No cost.

Senate: Identical provisions on FHA and Fannie Mae and Freddie Mac loan limits. Provides mortgage financing relief for homeowners with subprime loans by expanding the availability of state and local government bonds and raising the cap on the bonds by $10 billion over the next three years. Negligible cost.

Reuters had an interesting story about the success (or rather lack thereof) of the FHASecure program so far. Here is an excerpt:

LAS VEGAS, Feb 5 (Reuters) – A federal plan to help homeowners facing foreclosure must be expanded after drawing a tepid response from borrowers since its unveiling in August, panelists at a bond organization meeting said on Tuesday.

A study circulated within the American Securitization Forum last month proposed the Federal Housing Administration broaden its FHA Secure loan refinance program to stem more foreclosures. The program should allow borrowers delinquent for any reason to refinance into an FHA loan, versus the narrow requirement that borrowers face a higher interest rate.

The ASF proposal comes amid signs that falling home prices will continue to push foreclosures higher. FHA Secure thus far has refinanced about 1,000 borrowers, making it a “failure” so far, Rod Dubitsky, a managing director at Credit Suisse, said on an ASF panel here.

More…

Here is the press release and here are the relevant sections:

The Administration is acting now to help thousands of struggling American homeowners. The Administration has launched the FHASecure initiative, expected to help more than 300,000 families refinance their homes. In addition, Secretaries Paulson and Jackson have facilitated the private-sector HOPE NOW alliance, which has developed a plan under which more than a million homeowners could receive help.

The President calls on Congress to join him in helping American homeowners refinance their mortgages by passing important legislation, including a bill to modernize the Federal Housing Administration (FHA). The bill will give the FHA the necessary flexibility to help hundreds of thousands of additional families qualify for prime-rate financing. In addition, Congress needs to pass legislation permitting cities and states to help troubled borrowers by issuing tax-exempt bonds for refinancing existing home loans. Congress should also act to strengthen the regulation of Freddie Mac and Fannie Mae to ensure they focus on their important housing mission.

Here is an interesting quote from a recent speech given by President Bush. He is 100% behind beefing up the FHA program. As soon as the reform bill makes it through the senate we can expect a quick signing on the bill.

The government can help. The Federal Housing Administration has got the capacity to help refinance homes, and they need to expand the authority of the FHA to do it. And Congress needs to get that bill passed. I mean, this will be a positive step toward helping people stay in homes. And that’s what we want to do. See, you notice, I’m not saying we’re going to bail out the lenders — we’re going to help the individual person be able to keep their home. It’s in the interest of the country we do that.