FHA & LIBOR — Should Borrowers Be Silent?

by Peter G. Miller
July 27th, 2007
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It makes you wonder….

In it’s announcement that it would begin to allow the use of LIBOR indexes in August, HUD said that it had first asked for public comments. What response did it get for a major change to one of the largest mortgage programs in America?

The comment period for the proposed rule, says HUD, “closed on August 18, 2006, and HUD received five comments on the proposed rule. Comments were received from three trade organizations representing mortgage bankers and home builders, the home mortgage division of a bank, and a residential mortgage group.

“All five commenters supported HUD’s proposal to add LIBOR as an acceptable index for adjusting the interest rate of HUD-insured ARM products. The commenters wrote that the inclusion of the LIBOR allows lenders greater flexibility in offering ARM products, provides an incentive for more lenders to use the FHA program, and broadens mortgage options for FHA borrowers.”

Well, gee, how surprising that lenders would favor more index options. But what about borrowers? Is the LIBOR a good choice for borrowers? Are there not any organizations that represent borrowers who might have some thoughts, pro or con, on this matter? Should there be any special consumer protections when using an ARM index that’s based on foreign economic activity? LIBOR, after all, stands for the London Interbank Offered Rate.

Just curious….

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This entry was posted on Friday, July 27th, 2007 at 1:38 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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