FHA Mortgage Vs. “Suicide” Loans

by Peter G. Miller
June 6th, 2007

Usually when politicians speak their words are as smooth and oily as a piston. But now Alphonso Jackson, the Secretary of Housing and Urban Development has come out with a stinging criticism of “nontraditional” loans — those forms of financing which are definitely not like FHA mortgages. Speaking at the National Press Club in Washington on June 4th, Jackson said:

“The FHA is a mainstay of the American housing enterprise. Over the past 73 years, the FHA has helped millions of families become homeowners. Later this month, we will celebrate our 34 millionth FHA customer. And we have helped families stay in their homes. I mentioned earlier that refinancing with FHA could help tens of thousands of families with sub-prime loans. If Congress passes FHA reform, we could help hundreds of thousands and we could do so without cost to the taxpayers.”

Then Jackson added:

“If Congress allows us to set insurance premiums commensurate with risk – which makes a lot of sense — FHA could help those thousands of borrowers who need an exit strategy from their suicide mortgages. Imagine that — risk-based premiums for an insurance company! Who could argue with that?!? Unfortunately, under today’s restricted premium limits and maximum loan amounts, FHA simply cannot reach all the borrowers who need the ‘safety-net’ that FHA can provide.”

Wow — that’s plain speaking.

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