by Peter G. Miller
December 1st, 2008
FHA figures for the first half of November are out and you just have to say, wow.
The country, for those who may have missed the news, is in the midst of a foreclosure meltdown and HUD has hurried help with all the immediacy and urgency of FEMA after Hurricane Katrina.
In the first 15 days of the month, 69 people nationwide applied for financing under the Hope of Homeowners program. H4H, you will recall, was supposed to help as many as 400,000 borrowers avoid foreclosure and poverty. HUD is maintaining its perfect record in this category and — even though more liberal standards have been approved. To date it has yet to approve a single Hope for Homeowners mortgage application. Not one. So far a total of 180 H4H applications have been received since October 1st.
Meanwhile, on the oh-damn-I’m-facing-foreclosure front, HUD has permitted 39 delinquent conventional borrowers to refinance with FHA mortgages in the first half of November. Since October 1st HUD has allowed 142 borrowers nationwide to dump toxic loans in favor of FHA financing.
HUD did approve 67,818 FHA loans during the first half of November, that’s up 126.6% when compared with last year. It’s apparently getting either borrowers with better credit or making standards tougher because average credit scores now stand at 683 versus 650 last year.
These numbers plainly say that FHA financing is in demand, which is as it should be. The numbers also suggest that the FHA program is evolving into something which best serves well-qualified middle-class borrowers with solid credit scores.
The conflict, of course, is that many people would have better credit if they did not have toxic loans and soaring payments. If they could refinance with an FHA loan they would have lower and more predictable payments, and thus their credit scores would likely rise.
The original idea behind the FHA program, of course, was to take on riskier borrowers and make them less risky by allowing them to borrow on a sane basis. That was the thought in the 1930s, and it is a thought worth reconsidering today.