About Government Refinance and Home Purchase Programs

Les Christie over at CNNMoney.com recently wrote an interesting article on the line government officials are trying to walk where they help people with bad loans but don’t reward reckless borrowing practices. Christie writes:

Treasury Secretary Hank Paulson is walking a fine line, pushing the need to help troubled mortgage borrowers without rewarding past risky behavior.

“I have no interest in bailing out lenders or property speculators. Still, we must recognize the very real harms to families affected by the housing downturn,” Paulson said in prepared remarks for a speech given Tuesday at Georgetown University.

“We must take steps to minimize the neighborhood effects and the macroeconomic effects of this housing market correction,” he continued.

Jeanne Sahadi over at CNNMoney.com recently wrote this interesting piece on the moves toward FHA loans in the US:

BOSTON (CNNMoney.com) — If your credit is weak or your savings anemic, here are two phrases you’re likely to hear from mortgage loan officers in the next few years: FHA and mortgage insurance.

They’re part of a back-to-basics theme that was emphasized Monday at the annual conference of the Mortgage Bankers Association in Boston.

For those who entered the business in the past five years, they’ve only known the good times and will need to be re-educated, said Paul Bibb, CEO of National City Mortgage, who was on a panel of leading mortgage industry executives.

“You probably have a lot of loan officers who can’t spell FHA,” said Bibb.

Al Yoon recently recently wrote this interesting article on the FHA program for Reuters:

BOSTON, Oct 15 (Reuters) – The Federal Housing Administration will likely boost its share of the mortgage market to as high as 12 percent in coming months as it picks up borrowers locked out of subprime and other private lending programs, two leading industry executives said on Monday.

“I think FHA will play a huge role in the recovery of the market,” David Lowman, chief executive of JPMorgan Chase & Co.’s (JPM.N: Quote, Profile, Research) global mortgage group, said at the Mortgage Bankers Association annual meeting in Boston. Compared with a market share of about 2 percent in recent years, “I envision they will be in the double-digits, at 10 percent to 12 percent.”

President George W. Bush in late August announced a program that would widen the reach of the FHA program that guarantees loans purchased by mortgage investors. The initiative, known as FHASelect, makes it easier for borrowers facing default to refinance into the FHA program.

Larry Cragun over at the Seattle PI recently gave this useful overview of the differences between conventional and FHA loans:

Are you shopping for a home? When it comes to home shopping getting the right program may mean the difference between looking and buying.

Do you have concerns you might not be able to qualify? Do you have a loan you want out of, yet aren’t sure your situation is good enough? If so, you might want to talk to an FHA lender.

Sadly, FHA is not readily available to the mortgage community. The red tape, extra costs, and difficulties keep many good lenders from having it or wanting it. Another sad fact is that this lack of availability put some folks in sub prime loans when the could have closed FHA. In like manner some people don’t know they could buy now, and are not buying.

Lynn Underwood over at the the Star Tribune in Minnesota recently gave this useful overview of various mortgage programs now available:

Just six months ago, home buyers with borderline credit, questionable income and no money down could easily snag a mortgage.

Today lenders are playing it safe in response to increasing problems with subprime sweetheart loans and recent state legislation that created stricter lending guidelines.

Although the lending landscape has changed, there are still plenty of consumer-friendly loan options for a wide range of home buyers.

Ronny Loew, senior mortgage banker at First Horizon Home Loans, Edina, said the industry is responding by taking a more conservative approach. “We’re taking a big step back to the old ways,” he said.

Some of those time-tested loan programs have been around for decades. Federal Housing Administration (FHA) loans, for example, weren’t highly promoted in recent years because they offered less profitability to brokers, came with strict guidelines and could be time-consuming to process.

“Now they’re one of the only games in town,” said Kris Wilson, a senior loan officer at Fairway Independent Mortgage, Bloomington.

An article in Investor’s Business Daily recently pointed out the the FHA issue is likely to get a lot more national attention as the ’08 presidential campaigns ramp up:

The meltdown in subprime loans is a made-for-TV political extravaganza debuting just in time for election season — especially as more Americans keep losing their homes.

At least, that’s the way economist David Shulman sees it. He expects “show trials” before Democratic congressional committees to begin this winter, replete with testimony from distressed homeowners.

But so far the gloves have largely stayed on as regulators and lawmakers grapple with ways to help an estimated 2 million U.S. homeowners who have lost or are about to lose their homes — not to mention fix mortgage lending excesses that led to today’s debacle.

“A lot of it will be bipartisan, at least initially,” said Shulman, senior economist with the UCLA Anderson Forecast. “Both parties will try to show how sensitive they are to homeowners.”

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Aldo Svaldi over at the Denver Post recently had this to say about recent government mortgage assistance programs changes:

A new federal loan program designed to help borrowers cope with rising payments on adjustable-rate mortgages is kicking into gear.

An estimated 80,000 borrowers nationally are expected to take advantage of the FHASecure loan program, said Ben Johnson, director of the Denver Homeownership Center with the Federal Housing Administration.

Another 160,000 or so are expected to use other FHA loans to escape their unaffordable mortgages.

The first Colorado borrowers in the program should start receiving their new loans in early November.

Critics say the program doesn’t go far enough to help homeowners.

Barry Jacobs over at Affordable Housing Finance reports this progress as of today:

The House Financial Services Committee has approved legislation (H.R. 2985) to create a national affordable housing fund, bringing advocates one step closer to their goal of a dedicated funding source for housing aid.

The funding is still contingent on the passage of government-sponsored enterprise (GSE) reform and Federal Housing Administration (FHA) modernization legislation, which would channel money from Fannie Mae- Freddie Mac portfolio holdings and FHA premium revenue into the trust fund. Those sources are expected to provide $800 million to $1 billion annually for affordable housing.

“The growing shortage of affordable housing is one of the most serious social and economic problems facing our country,” said Financial Services Committee Chairman Barney Frank (D-Mass.) after the committee approved the bill, 45-23. “Given our severely constrained fiscal realities, we are today doing the best we can to address this—creating a lowincome housing trust fund that will be paid for in ways that do not draw from federal tax revenues.”

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Alan Zibel recently reported that a high percentage of blacks and Hispanics are paying a high percentages on their mortgages. (All the more reason to look at FHA options).

WASHINGTON (AP) _ A disproportionately large percentage of mortgages made to blacks and Hispanics last year met the government’s definition of “high cost” loans, a new study said.
The report, released Oct. 4 at an industry conference in Arlington Va., analyzed nationwide mortgage data for 2006 and reached conclusions similar to those of another study published by the Federal Reserve last month.

Advocacy groups say mortgage discrimination has contributed to the current crisis in lending to borrowers with weak, or subprime, credit, in which a growing number of families are losing their homes.

The study, sponsored by Richmond, Va.-based mortgage insurer Genworth Financial, concluded that 48 percent of home loans given to blacks and nearly 42 percent of loans given to Hispanics last year met the government’s definition of “high-cost “loans. That compares with 18 percent for whites and more than 24 percent for the overall population.

Bob Tedeschi of the New York Times wrote up this article on the most recent FHA initiatives recently:

When President Bush announced plans late in August to help borrowers who were struggling to keep up with their adjustable-rate mortgages, local housing advocates and lenders waited eagerly for details of exactly how the initiative would work.

Now that the Federal Housing Administration has disclosed those details, the jury is still out. “I think there’s a subset of borrowers this will help,” said Brian Chapelle, a partner in Potomac Partners in Washington, a consulting firm to the mortgage industry. “Whether it’s the 240,000 people the Bush administration said it would help, we’ll have to see.”

At the heart of the initiative is a new program, FHASecure, focused on the millions of people who took out adjustable-rate mortgages in recent years. Many of these loans had low initial interest rates that increased sharply after two or three years.

Often, mortgage companies lent money to those borrowers based on their ability to pay only the lower rate, and now millions are struggling to keep up with higher payments.

Dan Dressman over at the Cincinnati Inquirer recently wrote this review of the recent changes in government refinancing assistance programs:

The recent half percent drop in the Federal Reserve discount rate is a sign that the federal government is bullish about improving consumer confidence in the housing market.

Another sign came a few weeks ago when the House of Representatives passed H.R. 1852, the American Homeownership Act.

Allowing more flexibility in the Federal Housing Administration (FHA) program to address changes in the marketplace is the hallmark of this comprehensive legislation. Some of the key provisions include higher loan limits for high-cost areas, elimination of the 3-percent-down payment requirement, simpler condo loans and expanded use of reverse mortgages.

The legislation also permits the FHA to change the terms of a loan to prevent a foreclosure.

The White House recently said this about the new FHASecure initiative:

The Administration has moved forward within its statutory and regulatory authorities on steps to help struggling homeowners avoid foreclosure. For example, last month, the Administration launched a new Federal Housing Administration (FHA) initiative called “FHASecure,” which will bring the total number of families FHA projects to help refinance next year to approximately 240,000. President Bush calls on Congress to help an estimated additional 200,000 families avoid problems with their mortgages by passing FHA modernization legislation.