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Flat Earth Financing

by Peter G. Miller
January 31st, 2008

We keep getting emails regarding the FHASecure program, the FHA mortgage plan announced by President Bush in August that was specifically designed to save delinquent conventional borrowers.

HUD says “in only the first 4 months of FHASecure, more than 40,000 households have refinanced under the new housing insurance program to protect their families’ investment in the American Dream.”

This is about as believable as unicorns, weapons of mass destruction and evidence that the earth is flat.

HUD’s own FHA Outlook reports show that only a few hundred delinquent conventional borrowers have been able to get FHA financing. But HUD — undeterred by reality — simply says that FHASecure (or FHA Secure as it is sometimes known) now includes ALL conventional borrowers who use FHA financing. This makes no sense, since conventional borrowers with good credit do not need the FHASecure program, they can simply get regular FHA financing.

Who says FHASecure was specifically designed ONLY for troubled borrowers with toxic loans?

HUD.

Just look at what HUD has to say in its own FHA Annual Management Report Fiscal Year for 2007.

FHASecure Program. This temporary FHA program will provide refinancing
opportunities to homeowners for various types of adjustable rate mortgages (ARMs). FHASecure is designed to increase liquidity in the mortgage market and help people who have good credit, but who have not made all of their payments on time because of rising mortgage payments due to ARMs that have “reset”. This program will provide homeowners an option to help make their payments and keep their homes.”

The FHASecure program is now half of a good idea — the more-liberal mortgage standards. To make the program work HUD has to fix the program so that related credit dings can be ignored — and then maybe HUD will be able to justify claims of value and success for the program.

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