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What Next For The FHA Under Obama?

by Peter G. Miller
January 21st, 2009

With a new President and a new Congress now in Washington the FHA question of the moment is what comes next.

By any standard the FHA mortgage program is central to any effort to restore home values if only because so many private-sector programs are going or gone. Option ARMs are dead, interest-only mortgages are rare, stated-income loan applications are hardly common and it all probably doesn’t matter unless your have a credit record that sparks and shines.

The new Administration is certain to review a number of FHA mortgage programs and provisions to see what has happened and what can be done better. Here are the major issues:

Hope for Homeowners: This was a program passed over the summer as part of the FHA reform package. It was supposed to begin October 1st and HUD has allegedly allotted 22 people to the program, but we don’t know for sure.

According to congressional testimony by James A. Heist, HUD’s assistant attorney inspector general for audit, “it is our understanding from the Department that funding for 22 staff positions and approximately $20 million for system improvements have been made available for the Hope for Homeowners program.”

Mr Heist does not say HUD has actually deployed 22 people to work on the H4H program, he only says “it is our understanding” that money has been made available for this purpose. This is hardly re-assuring and, in fact, there is no evidence that anyone at HUD is actually doing anything. How do we know? Well HUD’s figures as of December 31st — three full months after the H4H program began — show there have been 370 program applications but that “no Hope for Homeowners cases have been insured to date.”

Look for Congress to investigate the Hope for Homeowners program and while they’re at it expect them to review the FHASecure program as well.

FHASecure was touted as a program to help homeowners with toxic loans refinance into FHA mortgages. That happened — but rarely.

In the program’s first year, fiscal 2008, only 3,794 delinquent conventional borrowers were approved for FHA financing. In the period between October 1, 2008 and the end of the year another 243 lucky souls were about to use the program.

A third matter concerns FHA premium refunds, a program benefit discontinued on December 8, 2004 by the Bush Administration which sent the money — some $14 billion over eight years not counting lost interest — to the Treasury. The odds are overwhelming that the refund benefit will not be restored and that instead the money will be used to fund low-income housing projects.

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This entry was posted on Wednesday, January 21st, 2009 at 2:58 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.

One Response to “What Next For The FHA Under Obama?”

  1. Paul Says:

    Do you think restoring DPA will be a priority of the Obama administration? I believe HR600 was introduced last week in the House.

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