From Homescape

Last week I attended the National Association of Real Estate Editors conference in Dallas. While there was much discussion on what has been deemed “the worst housing crisis since the Depression,” real estate and financial trade groups appeared to be optimistic about the fate of the market. It appears that all eyes are currently locked on the federal government to see how they will help soften the blow.

Federal Housing Authority Commissioner Brian Montgomery, who spoke at the conference, gave a roaring endorsement for FHA modernization. He said there are affordable FHA-backed loans that are not subprime. Montgomery believes that FHA loans should become the first option and not just a last resort for new homebuyers.

“People need to realize that there are alternatives, that they don’t have to walk away from homes because of foreclosure,” Montgomery said. “FHA modernization has bipartisan support, but delay of FHA modernization due to partisan politics is hurting consumers,”

FHASecure program
The new FHASecure program, rolled out by the Bush administration in August, was originally designed to help borrowers who had fallen behind on payments on adjustable-rate mortgage (ARM) loans after an interest-rate reset. On April 9, the administration said it would expand the FHASecure program by creating two new categories of eligible borrowers:

1. Those with ARM loans who were late on two consecutive monthly mortgage payments or at two different times over the previous 12 months. FHA will require a 97 percent loan-to-value (LTV) ratio for these borrowers to refinance into a government-backed loan — which in many cases would require lenders to write down some principal.

2. Those with ARM loans who were late on three consecutive monthly mortgage payments or at three different times over the past 12 months. FHA will require a 90 percent LTV ratio for these borrowers to refinance.

HUD said the expanded FHASecure guidelines are set to be implemented on July 14 in conjunction with risk-based premium pricing.

Political gridlock
Montgomery said FHA has already helped some 200,000 American home owners with troubled loans refinance and expects to help another 500,000 homeowners by the end of the year. FHASecure accounted for $28.5 billion of the $68 billion in loans FHA has helped facilitate since September.

Democrats are pushing for an even bigger, $300 billion expansion of FHA loan guarantee programs to enable up to 2 million FHA-backed refinance loans in cases where lenders agree to accept no more than 85 percent of a property’s current appraised value. That plan, which is opposed by the Bush administration, is apart of the American Housing Rescue and Foreclosure Prevention Act. The bill was approved last week but fell short of the margin that would be needed to override President Bush’s threat to veto it.

The Bush administration opposes the expansion of FHA loan guarantees put forward in March by Rep. Barney Frank (D-Mass.) and has called it a “bailout” of lenders and speculators.

Got hot local housing tips or a story you want to share? Contact Amy Le at openingdoorsblog@homescape.com.