FHA Mortgage Guide

For all the talk about the FHA program, FHA secure the need for modernization where the opposition to it, the bottom line is that mortgage insurance programs sponsored, organized and funded by the federal government are political creatures.

The enormous number foreclosures that we are now seeing represents an issue which is simply too large to be ignored in the presidential contest which is now under way. We hope from time to time to carry the words of various candidates and their views on housing and mortgages. As a place to start, here are some of the thoughts released today by the campaign of Hillary Clinton (D-NY):

>>>”Rising house prices had allowed families to draw on the equity in their homes to pay bills and put their children through college. But with home prices weakening, that is increasingly difficult to do. Some experts now estimate that house price weakness could erase $3 trillion in household wealth. Additionally, too many families are losing their homes as their mortgage rates reset upwards. There have been more than 1.3 million foreclosure filings so far this year. Also, economists are now concerned that the problems in housing could spillover and hurt the broader economy.”

>>> “Crack down on unscrupulous brokers; curb mortgage lending abuses; assist families facing foreclosure; and expand affordable housing options. Homeownership is a fundamental part of the American dream, and Hillary is committed to helping families preserve and realize it. Home price declines, and mortgage rates resetting, makes it critical that additional steps be taken to help families replace unworkable mortgages.”

Clinton is suggesting three steps to confront the mortgage meltdown:

>>>Implement the “Save Our Homes” program. The Save Our Homes program would temporarily use Fannie Mae, Freddie Mac, and the state housing finance agencies to help reduce foreclosures. The program would be in effect for 2 years. First, Hillary will temporarily increase Fannie Mae and Freddie Mac’s portfolio caps by 5% to give the companies approximately $70 billion in incremental mortgage purchasing capacity. With the caps lifted, the two companies will be directed to work with state housing agencies and private lenders to help at-risk homeowners replace their unworkable mortgages (mostly adjustable rate mortgages) with stable, fixed-rate loans. For example, the companies would help lenders and state agencies set responsible underwriting standards for the new loans; and the companies would also purchase some of these loans for their portfolios.

Second, Hillary will temporarily modify the Mortgage Revenue Bond (MRB) program to help families refinance unworkable mortgages. Under the MRB, state housing finance agencies use the proceeds of tax-exempt bond issuances to provide low-cost mortgages to low- and moderate-income families. Hillary will modify the MRB program in two ways to address the foreclosure crisis: First, state agencies will be permitted to use MRBs to refinance mortgages (under current law, MRB funds can only be used for original mortgages). And second, Hillary will increase the federal cap on the MRB program by roughly 25% to provide an additional $2.5 billion in refinancing capacity. Empowering the state housing agencies to refinance unworkable mortgages would enable them to help low- and moderate income people replace resetting ARMs with stable, fixed-rate loans.”

>>>Implement the “Realizing the Dream” Program. The goal of this program is to ensure that responsible borrowers have access to mortgage credit. At present, banks are reluctant to write new mortgages, and they are especially reluctant to write mortgages that exceed the loan size ($417,000) that Fannie and Freddie purchase. To increase mortgage credit availability, Hillary will temporarily introduce a separate GSE loan limit for high cost areas. The loan limit will be indexed to median area home prices and capped at $650,000. Hillary will also direct Fannie and Freddie to make immediate use of their increased purchasing capacity to add liquidity to the mortgage markets. These actions would be immediately beneficial to credit-worthy middle class families who live in high cost areas and now have difficulty obtaining reasonably priced mortgages.

>>>The Foreclosure Rescue Fraud Act. An increasing number of people are seeking the aid of “foreclosure consultants” to help them avoid losing their homes. While some of these consultants are legitimate professionals, others are con-artists taking advantage of distressed homeowners. The fraudulent consultants take money from homeowners without providing any actual service, manipulate homeowners into transferring their property deeds to them, or strip the equity from people’s houses. Hillary will pass legislation that sets national, minimal standards of conduct for foreclosure consultants. The legislation would impose criminal penalties on violators, and allows victims to sue for damages. The law would also make $100 million available to states for prosecuting foreclosure rescue fraud and assisting homeowners who have been conned by foreclosure consultants.

Check out these FHA resources for more information

This entry was posted on Monday, October 8th, 2007 at 4:01 pm and is filed under FHA. 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.