I won’t take up too much of your time rehashing what this excellent and straight to the point article is about. I’ll just say that it is good to see something positive these days about anything going on in the mortgage business. This article by Peter G. Miller entitled “FHA Loan Program: Model of Success?” in Realty Times expresses some thoughts very similar to those I have expressed in previous posts here. I recommend you take a look and let the author know what you think. Maybe even make use of some of those “social bookmarking” services everyone is talking about to help get the article noticed.
It seems the upcoming changes in FHA mortgage insurance rates haven’t drawn much attention. Looks like that may be changing according to this news item that I saw on Bloomberg.com this morning.
The real estate market is crashing around us. Refinances get harder to finish every day. Usually because the borrower’s home is worth less than it was when they bought it two years ago. Subprime lending is a faint shadow of what it used to be. Every day FNMA and Freddie Mac or the mortgage insurance companies tighten up the reins on us just a little bit more.
Today, Countrywide - the biggest or next to biggest lender in the country most of the time - actually had to make an announcement that it wasn’t going to file bankruptcy in order to stop its stock from falling further!
Worst of all, today Freddie Mac announce that it had lost $2.02 billion in the third quarter and “absorbed both a $1.2 billion provision for credit losses as well as a $3.6 billion charge in mark-to-market activity for its portfolio assets.”
While everyone has their eyes locked on Congress as it tries to solve the massive problem of how mortgage brokers are paid, I would like to remind everyone about the real problem in the mortgage industry - fraud. When all the dust settles in the mortgage industry, I believe we will find that a large percentage of the foreclosures destroying real estate markets around the country have come from instances of fraudulent mortgages.
Professional “house flipping” rings have generated huge amounts of cash which they use to help in their efforts to drag straw buyers, inexperienced loan officers and real estate agents, appraisers, and even attorneys into their crooked schemes. It isn’t the use of yield spread premium that has led to this problem. Most of the money comes from the seller side of the transactions. This will turn out to be a much larger factor in the problem than many experts think it will. Probably more significant than subprime loans, stated loans and 100% financing programs that many want to blame for the problem.
The FHASecure program was officially announced in September 2007, however it was not until the last few weeks that a “pool” was created for the mortgage backed securities necessary to raise the money to fund loans made under the program. In spite of that delay, FHA Commissioner Brian Montgomery announced before a Congressional hearing on Friday, November 2, 2007 that 540 lenders are officially offering the program and more than 70,000 conventional borrowers have applied for FHA loans under the program!
