Kat

It’s also important to note that every one of these borrowers did, in fact have a choice of an adjustable or a fixed rate loan. The difference was the rate and how much house they could “afford”. 5.5% was the adjustable or 7.25% fixed. The majority of these borrowers wanted a conforming rate even though they were non-conforming borrowers. The got that rate but had to sacrifice their better judgement to get it.

A mortgage vet would surely know that notification standards for HOEPA do not apply to most loans, much less toxic financing. As the FTC says, HOEPA “rules do not cover loans to buy or build your home, reverse mortgages or home equity lines of credit.” This lack of regulatory oversight is, of course, the heart of the problem.

A mortgage vet would also know that under HOEPA’s Section 129(I), the Federal Reserve has expansive powers to deal with unfair and deceptive acts or practices (UDAP) regarding ALL loans. As Michael Calhoun, President of the Center for Responsible Lending, says, “the Board has not used this authority.”

No one says all “affordability” products are bad, merely that they are a woeful idea for very large numbers of borrowers, lenders and investors. Combine toxic loans with the lack of a fiduciary obligation on the part of loan officers to get the best possible terms for borrowers and you wind up with lots of foreclosures and lender losses.

This is typical of the drive-by journalistic mentality of the uniformed writer. To say that all of these affordability products are bad and should have been stopped or eliminated is naive at best and probably better defined as ignorant.

And just so you know, HOEPA does not restrict these products from being offered.

The program uses the general FHA loans limits. This means many borrowers in high-cost areas such as California, Boston, New York and Washington will not be able to finance big loans. However, not all borrowers in these areas have huge mortgages so the program will surely help some with toxic mortgages.

The income ratio under the program will be 31/43 — the general FHA standard.

The loan should be available from any lender that handles FHA financing, which means most lenders. Shop around for rates — the product is the same no matter which lender you use.

How do I qualify for the FHAsecure program. Is there a phone number, website I can go to to apply?

Thank You
Mario R. Dagulo

We would not have this mess had federal regulators moved several years ago to stop lenders from issuing option ARMs, interest-only loans and stated income loan applications. The Fed had such power under HOEPA and did not use it.

The FHA ARM program would be better for consumers had the annual and lifetime caps not been raised from 1/5 to 2/6. The VA program remains at 1/5.

The government could have stopped lenders from changing caps on private sector loans from 2/6 to 2/5/6 — the middle cap being for the first re-set. Of course borrowers will have problems if the first re-set doubles or triples monthly payments, as a senior FHA spokesman said yesterday.

The new FHA effort should be applauded — but it should also be seen in perspective.

Peter