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The End Of FHASecure

by Peter G. Miller
December 29th, 2008

After December 31st the FHASecure program will be no more.

The official explanation for the closure looks like this:

“While FHA will retain its standard rate-and-term refinance program for borrowers who are current on their existing mortgages, the FHASecure program under which FHA was able to insure refinance transactions for borrows delinquent on their mortgages, will terminate on December 31, 2008, as per FHA’s initial guidance. Maintaining the program past the original termination date would have a negative financial impact on the MMI Fund that would have to be offset by either substantial across-the-board single family program premium increases or the suspension of FHA’s single family insurance programs altogether.”

Huh? You’re kidding.

Premiums were raised — from generally 1.5 percent up front to 1.75 percent. The monthly premium for most borrowers went from .50 percent to .55 percent.

The FHASecure program was originally announced as a federal program to help borrowers facing foreclosure. As President Bush explained, “in the coming days, the FHA will launch a new program called FHA-Secure. This program will allow American homeowners who have got good credit history but cannot afford their current payments to refinance into FHA-insured mortgages. This means that many families who are struggling now will be able to refinance their loans, meet their monthly payments and keep their homes. In other words, we’re going to start reaching out and making sure people know that this option is available to them so they can stay in their homes.”

What allegedly started out as a federal program to help borrowers with toxic loans quickly morphed into program that included any borrower with a lung. The disparity was so glaring that HUD actually had to change its own FAQ page and announce that “these FAQs have been modified to reflect that the term FHASecure applies to all conventional to FHA refinance transactions. The previous edition of FAQs indicated that only those borrowers who were delinquent due to the reset of their non-FHA ARMs were eligible for FHASecure, causing confusion in the industry.”

There was absolutely no confusion. HUD actually issued a letter to lenders saying “this mortgagee letter describes how lenders and homeowners may refinance mortgages that, due to the increased mortgage payment following the reset, have become delinquent.

“This mortgagee letter extends eligibility to borrowers who became delinquent under their current mortgage following the reset of the interest rate.

“These instructions are designed to permit homeowners, who previous to their reset, demonstrated an ability to meet their mortgage obligations, an opportunity to refinance into a prime-rate FHA-insured mortgage.”

Oh well, the impact of the FHASecure program was two-fold: First, it populated a lot news releases and speeches designed to create the illusion of interest and activity in the foreclosure mess. Second, it had no meaningful impact because as of December 15th just 4,009 delinquent conventional borrowers nationwide have been able to refinance with FHA loans.

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This entry was posted on Monday, December 29th, 2008 at 2:08 am and is filed under . You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.

2 Responses to “The End Of FHASecure”

  1. gladys frias Says:

    Hi, Does this means, that first time home buyer would have to pay higher percentage on a fha, loan or even down payments for a home?

    How many years must go by, after a bankrupcy (discharged) for the fha to aprove a loan, or even help, with purchasing a home?

  2. Scott Says:

    Your conclusions are dead on, another worthless program for the politicians to claim some bogus benefit so they can get re-elected. I own a pool of 100 hard money loans with 50% in default. I would like to help these folks but I’m not a bank and my cost of money doesn’t allow me to refi these people at current market rates so I just end up taking the houses which were funded at 65% LTV. I don’t lose on these deals as I make the properties into rentals, but the borrowers sure do. Would be nice for the borrowers if they had access to capital that would allow them to keep the houses. FHA Secure or H4H could have done that but both were complete failures since nobody wanted to own the mortgages even with the FHA backing. Only real solution is a program that has the Fed buy the mortgages directly. That of course makes the banks irrelevant along with the $300B we gave them……

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