Why Is This A Big Deal?

by Peter G. Miller
January 18th, 2008

Someone asked why the mutating HUD definition of the FHASecure loan program is such a big deal. Is it just a few loud people creating an artificial issue about FHA mortgages?


The FHASecure program started out as a way to help people with delinquent conventional loans avoid foreclosure. This is keenly important because thousands of people are losing their homes every day as a result of toxic mortgages. If they can refinance they will save their homes — and they will also help lenders reduce their losses. Thus, everyone benefits if the FHASecure program is a success.

But it’s not.

Refinancing a few hundred delinquent conventional loans per month with FHA mortgages does not begin to address the scale of the problem we face nationwide. The FHASecure program, to date, is a flop.

This, of course, is a political problem since the FHASecure program was the only real addition within the foreclosure prevention effort announced by President Bush on August 31st. If FHASecure fails, then the President’s program will be revealed for what it is: jawboning and voluntary efforts that produce little result.

Please understand: I don’t care if a Republican, Democrat or whatever is able to reduce foreclosure levels. It makes no difference to anyone. What counts is that we save as many homeowners as possible.

If you think this matter does not impact you directly, look at local home values in most areas. The value of YOUR house will decline if a few homes in your neighborhood are foreclosed and if numerous distressed borrowers will sell at any price. That means your house will be worth less, your ability to get a home equity loan will be reduced, the amount you can refinance will fall and the value of your property to support a reverse mortgage will drop. None of this is good for anyone.

Everyone wants HUD to do well, but if HUD cannot come out and say what it’s doing, warts and all, then it has no credibility. A news release claiming 33,000 FHASecure refinances is not just wrong, it’s an outrage, a distortion and a cover-up — evidence that the government is doing just about nothing to ease the mortgage meltdown.

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