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Can The FHA Rescue Plan Work?

by Peter G. Miller
October 1st, 2007

RealtyTrac.com — the leading provider of foreclosure information and listings — has posted my detailed look at the FHASecure program. This is a good opportunity to see how FHASecure works and the political hurdles which had to be overcome to assure acceptance in Washington.

The FHASecure program is really a compromise between those who wanted to bail out as many troubled borrowers as possible and those who worried about the ability of the government to insure unlimited numbers of loans. The end result was a clever effort that gave ground to both views.

“The FHASecure program is a balanced effort to save an impressive number of homeowners from foreclosure,” says Jim Saccacio, Chairman and CEO at RealtyTrac.com, the nation’s leading foreclosure marketplace. “It will not help everyone, but there’s no responsible program that can unravel all the damage done by toxic mortgages.

“What we’re really looking at is a major effort to end the toxic loan era,” Saccacio continued. “The next steps will involve better loan disclosures, tougher lender regulation, increased consumer education, changes in the tax rules and far more lender responsibility to do right for borrowers.”

See: Can The FHA Rescue Plan Work? for the entire column.

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One Response to “Can The FHA Rescue Plan Work?”

  1. Dan Stephens Says:

    So far no government effort has done much to save the day, including FHASecure which can only nibble at the margins of the problem. Most government proposals to date go exactly the wrong direction by actually proposing to tighten lending standards, and make refinances more difficult to fund especially for subprime ARMs (i.e. requiring escrows), thereby guaranteeing that most holders of toxic loans will not be able to rfinance. Look at some of the proposed amendments to Reg Z on the Federal Reserve website under news, and look at some provisions of Senate S1299 and S2452 and House. Look at what Minnesota put into effect on August 1,2007: all option ARMs illegal, all low doc loans illegal, all ARMs qualify with full doc with the fully amortizing payment at the fully indexed rate. Even Warren Buffet can’t get a 5% LTV stated income prime loan to buy a home in Minnesota. Legislating guidelines is unprecedented, and restrictive guidelines aimed at the subprime market will almost guarantee that the most feared catastrophe is realized. So far all the efforts are geared toward crucifying brokers, making loans harder to get, and trying to make certain than prospective subprime ARM borrowers understand what a horrible loan they’ll be getting. The one most important thing that no government entity is doing to my knowledge is proposing to regulate the terms of ARMs so they aren’t so dangerous. How can it be that in a high-tech, well-educated society everybody agrees on the basic cause of a problem but not a soul proposes anythng to fix it.

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