I’m often amazed when supposed experts issue opinions on subjects that I actually know something about. It is frightening how often the so-called experts are completely wrong. Here is a recent example.
I usually try to limit political comments in this blog since it is primarily intended to be a training and guideline update source designed to help loan officers originate and close FHA loans. However a June 21, 2008 editorial in the Wall Street Journal entitled “The FHA Time Bomb” has such a smörgåsbord of misinformation and misdirection that I feel compelled to comment.
On Thursday June 19, 2008 HUD issued a press release indicating that they were sending out letters to 675,000 “at risk” homeowners. As has been the case with most of HUD’s efforts for troubled borrowers, the gist of the letter leads this writer to believe that HUD is really going after borrowers with good credit. Syndicated author Peter Miller agrees with this viewpoint in his Friday post on FHA Mortgage Guide. As he notes, many of these borrowers might well have qualified for an FHA loan in the first place.
On Oct. 30, 2007, I published a post entitled “FHA Mortgage Co-brokering: Watch Out!” in which I warned of potential violations of FHA’s policy regarding payments to non-approved mortgage brokers. HUD made an announcement that day outlining their policy, but it was not issued in the form of an official Mortgagee Letter and it did not clearly identify that the policy applied to any fee paid by the borrower and not just payments made through yield spread premium.
In response to my post “Warning: Why HUD May Stop Your Loan From Closing“, HUD has now waived their anti-flipping rule in certain circumstances. (Just kidding about them responding to my post, but they have taken action.)
One of the most touching experiences loan officers go through when we conduct marketing campaigns seeking FHA mortgage prospects are the borrowers who call us wanting to buy a home for their family but they just have too much bad credit to overcome in order to qualify for even an FHA loan. Often they have a bankruptcy.
HUD continues to use higher default rates associated with loans using DPA as their rationale for killing off the non-profit down payment assistance programs. However, you can’t use HUD’s raw statistics to say DPA causes a higher foreclosure rate, only to show that DPA is associated with a higher foreclosure rate. The reason is that these raw figures aren’t adjusted to account for other factors such as credit, debt ratio, time on the job, local economic conditions etc.
