http://www.fhaloanpros.com/2007/10/can-the-fha-rescue-plan-work/ The Unofficial Guide to FHA Loans & Mortgages Thu, 16 Oct 2008 00:25:35 +0000 http://wordpress.org/?v=2.6 http://www.fhaloanpros.com/2007/10/can-the-fha-rescue-plan-work/#comment-2567 Dan Stephens Mon, 21 Jan 2008 19:44:02 +0000 http://www.fhaloanpros.com/2007/10/can-the-fha-rescue-plan-work/#comment-2567 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. 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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