Bush Foreclosure Plan — Move Borrowers To FHA Loans

by Peter G. Miller
December 6th, 2007

The President’s foreclosure relief program is out. It won’t do much of anything that could not have been done last week without the President’s foreclosure relief program.

Essentially the program is a voluntary effort that the better lenders, servicers and investors will easily adopt. As to the rest of the lender community, they’re the very folks who got us into this mess in the first place.

Lenders love voluntary standards because voluntary standards are no standards at all. If we want to get something done we’ll need to pass H.R. 3915 or something close, a bill despised by much of the lending community because it has actual consequences for those who overcharge or fail to serve the best interests of borrowers.

Essentially the President’s idea is to fob-off the most-qualified troubled borrowers into the FHA program and into the FHASecure plan in particular. That could be very good for borrowers because any FHA loan is wildly better than a subprime product. However, any well-qualified subprime borrower can already go into the FHA program, so there’s nothing new or better here.

The release below is from the Neighborhood Assistance Corporation of American — they’re right on target with their criticism.

The Neighborhood Assistance Corporation of America, (NACA)

Jamaica Plain, MA (December 6, 2007) – The Neighborhood Assistance Corporation of America, (NACA) recognizes the extraordinary precedent that President Bush is setting to address the mortgage crisis, but is critical of its limited impact on homeowners at risk of foreclosure. This new standard for government intervention in the mortgage industry is recognition that if immediate and dramatic action is not taken that its will push the economy into a recession. This is the first time the anti-regulation and pro-business Bush administration has taken across the board steps to limit damage by big business.

The mortgage industry has pushed defective mortgage products that created this crisis. These mortgages were never about long-term homeownership, but about massive profits for the lenders, investment bankers, brokers and rating agencies. NACA has been in the forefront of combating the mortgage crisis and has provided the most significant solution with its agreement with Countrywide Financial that permanently reduces the interest rate for homeowners to what they can afford – often to five or six percent fixed.

The Bush administration’s rescue plan impacts a limited number of homeowners and even those within the criteria will only have a temporary reprieve. Freezing interest rates temporarily is analogous to having a defective automobile with no brakes, and rather than fix the brakes, you are allowed to park it while making the payments and then drive it down the hill full speed. The inevitable result will be a crash or in mortgage terms – foreclosure. “The limited scope of the announcement will be disappointing for the millions of homeowners at risk of foreclosure,” said Bruce Marks, NACA CEO. “President Bush is abandoning the approximately one million homeowners already on the brink of foreclosure.”

The positive aspect of the announcement is the new standard for government intervention. This provides the precedent and standard to further limit interest rate increases and to roll back many others as the mortgage crisis deepens during the next few months. In contrast to the previous Savings and Loan bailout, this forces the financial industry to remedy the crisis they have created. The only real solution is to go back to responsible lending. Adjustable Rate Mortgages (“ARMS”) should decrease when interest rates go down, instead of the current strangulation ARMs whose rates often double regardless of market changes. These are defective mortgage products whose interest rate increases must be permanently stopped and rolled back to what the homeowner can afford.

About the Neighborhood Assistance Corporation of America (www.naca.com)

NACA, a national non-profit community advocacy and homeownership organization established in 1988, has been the lead organization in the fight to identify, expose, and oppose predatory lending and exploitive lending practices. NACA first exposed Fleet Bank’s lending abuses in 1991, followed by numerous other campaigns against companies that victimize low- and moderate-income people pursuing the dream of homeownership.

NACA provides one mortgage which is the best in the country requiring no down payment, no closing costs, no points, no fees, no perfect credit at a below interest rate currently 5.125% 30 year fixed. NACA has $10 Billion committed to this mortgage with more than 35 offices across the country providing working people with an unmatched program and national model for doing mortgage lending the right way.

NACA continues to lead the fight in advocating and assisting homeowners at risk of foreclosure in the current mortgage crisis. In April 2007 NACA committed One Billion dollars to refinance homeowners out of their unaffordable loans, constituting the largest commitment to homeowners to date. In October, NACA entered into a national agreement with Countrywide to restructure mortgages to what the homeowners can afford. NACA’s program and advocacy have been featured in the national and local media nationwide.

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This entry was posted on Thursday, December 6th, 2007 at 4:39 pm 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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