Tuesday, October 16, 2007

FHASecure Initiative - Not impressed.....

First, I know that a lot of people are in trouble and a lot more on the verge. All you have to do is look around at the abundance of foreclosures across the nation. A lot of Mortgage Brokers got rich by making loans that NEVER should have been made in the first place. I could share hundreds of stories I have ran across personally that were down right fraudulent and behalf of the application from either the buyer's or loan officer's behalf and sometimes both.

Some "highlights" of the FHASecure Initiative follow (from National Association of Realtors site):
  • The mortgage being refinanced must be a non-FHA ARM that has reset.

  • The mortgagor’s payment history on the non-FHA ARM must show that, prior to the reset of the mortgage, the mortgagor was current in making the monthly mortgage payments, i.e., the homeowner’s mortgage payment history during the 6 months prior to the reset showed no instances of making mortgage payments outside the month due.

  • If there is sufficient equity in the home, under additional eligibility instructions provided below, FHA will insure mortgages that include missed mortgage payments.

  • Under certain conditions explained below, FHA will insure first mortgages where (1) the existing note holder writes off the amount of indebtedness that cannot be refinanced into the FHA insured mortgage; or (2) either the FHA-approved lender making the new mortgage or the existing note holder may take back a second lien that includes closing costs, arrearages or previous secondary financing if the indebtedness exceeds FHA prescribed LTV and maximum mortgage amount limits.

  • Mortgagees must determine, as part of the underwriting process, that the reset of the non-FHA ARM monthly payments caused the mortgagor’s inability to make the monthly payments and that the mortgagor has sufficient income and resources to make the monthly payments under the new FHA-insured refinancing mortgage.

Now I do think it is great that something is being done to head off anymore potential problems and to attempt to at least slow the default rate. The thing that bothers me is that I have heard it briefly mentioned on news broadcasts, radio and here and there as I am browsing the internet and almost every single reference, especially the media other than online, are talking about it as a means to help all those who are already in trouble. This does NOTHING of the sort. It simply gives those who haven't been late for 6 months and not yet in need of help some help. Kind of like when a bank won't lend you money when you need it but when you no longer do they will throw it at you.

I am curious as to how others feel about this program and even more curious as to how many borrowers will actually take advantage of it?


Barry Cox - Scottsdale Homes said...

"A lot of Mortgage Brokers got rich by making loans that NEVER should have been made in the first place."

I agree with your statement. Did you sell any homes during that period of time to people who probably shouldn't have been qualified?

So who's to blame? Mortgage Broker, Bank, Realtor, Buyer? Probably a little bit of everyone shares some blame. Wouldn't you agree?

Eric - All-State Housing said...

I agree 100%. There is more than enough blame to go around for what is transpiring right now.

Personally I did sell homes during that time period but my specialty is dealing with people who can't get qualified traditionally. Transactions are of course set up to protect me when something goes wrong but I also protect the people I put into the home to have a way to get out if they can no longer afford the payments.