HUD Chief Admits Hope For Homeowners Is A Failure
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Consumers, please listen closely. If you are still holding out hope that a new FHA program is going to save you from foreclosure, then RUN. Do not walk. Find another option before it is too late. Loan officers, stop trying to drum up business for a useless program that had no chance from the start, and then disappointing your borrowers who are already having a bad enough time of it.
In a December 17th Washington Post article, HUD Secretary Steve Preston declares the Hope for Homeowners program a failure. He places the blame on Congress for attempting to micromanage the program in the legislation instead of letting HUD iron out the details. The article also confirms what many have been saying – only 312 people have been helped by the program since it officially started at the beginning of October. The article quotes Secretary Preston
“What most people don’t understand is that this program was designed to the detail by Congress,” Preston said. “Congress dotted the i’s and crossed the t’s for us, and unfortunately it has made this program tough to use.”
FHA Commissioner Brian Montgomery was literally vocally attacked by lenders, housing counselors and real estate agents at a Hope For Homeowners training session in Atlanta. According to the article he described it as a “rock throwing session”. I’m not really sure what they expected. I guess Mr. Montgomery was obligated by his position to show up and at least try to explain the program.
The program was put into place filled with compromises that made it hopeless and impossible from the beginning. Anyone with an IQ above room temperature could see it, but it seemed to slip by Congress as they all rushed to take credit for saving 400,00 homeowners from foreclosure. The requirements almost seemed to be designed to be impossible to meet and the resulting loan essentially caused it to make more sense for borrowers to just walk away from the home than accept the terms.
To quote the Washington Post article again:
“You’re paying a premium to borrow the money already, and that ought to be enough,” said John Taylor, chief executive of the National Community Reinvestment Coalition “To me this falls into the category of, we want your firstborn.”
Of course, official Congressional buffoon Barney Frank – one of the top cheerleaders behind almost every wrong turn taken getting into this mortgage mess – blames the problems on FHA. Frank makes the case that certain elements of the Hope for Homeowners program had to placed there to make the program palatable to the American public. For instance, the requirement that any equity from selling the home must be split with the government. Quoting the article again,
“You’re not going to get a program approved that helps people refinance loans on their homes and then allows them to turn around the following year and make a profit on that home,” Frank said.
I don’t know what dream world he is living in where real estate values are going to go up that much by next year, but the first question that comes to my mind is: What is the government giving these people that is worth signing away any future equity? The answer is nothing. The lenders (or more specifically, the individuals, retirement funds and money market/mutual funds who own mortgage bonds) are being asked to take a loss, not the government.
Why not simply allow the lender to keep a lien on the property for the remaining amount of the mortgage which can’t be paid off right now. There was never any reason to filter the money through the government. Why not create some procedure similar to an FHA streamline refinance where people who have been making their payments on time for a set period of time could refinance as long as their payment wasn’t going down. Why such a rush to bail out Wall Street with a blank check, when no one is willing to give a similar break to homeowners who made a mistake.
Who knows. Maybe the powers that be will get the program fixed. Past experience doesn’t support that opinion though. If you are a homeowner in trouble, find out what you need to do to get a loan modification. Don’t keep waiting on an FHA program until it’s too late.
Tagged with: Hope for Homeowners • loan modification
Filed under: Hope for Homeowners
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1) what happened to the PMI payments that were made in the last 5 years? weren’t they supposed to be an insurance to protect the banks against foreclosures?
2) if someone didn’t pay on their last mortgage, what makes anyone think they will pay on a “new” mortgage? if they had an ARM and the rate “righted” to today’s numbers, and they were only able to make the payments on the “INTRODUCTORY” rate of 0, 1 or 2%, in order for them to have a note that is affordable now would be to discount the note by more than 50%! Shouldn’t they have purchased a home at that price back then?
Just my $.02….I have expressed elsewhere on the site that I would be happy to see FHA used to finance the new buyers purchasing the less expensive foreclosures as prices fall. I’m not happy at all with FHA being the “go to” program for saving people from foreclosure. I’m just trying to point out that Congress didn’t pass a bill that made any sense by their own standards. It just served to get people’s hopes up for no reason and give politicians the chance to thump their chests a little.
I’m trying to convince the people in trouble to move on and quit hoping FHA will be the answer.
In the case of the PMI payments, they should cover 20%-30% of the loan balance, but the MI companies are going bankrupt left and right with the rest of the industry so it isn’t a sure thing.
Those people who were stupid enough to buy a home based on 1% or 2% introductory rates will just have to pay the price of their mistake. A home is no different from any other investment in that if you don’t make the right calls, you can lose your money. The period of time when people were allowed to use the introductory rate to qualify on ARMs didn’t really last that long. Long before it was made a requirement, most lenders had switched to using a higher rate, if the not the highest possible rate to qualify. The problem was that many of those people were getting stated income loans and lied about their income in the first place. There are quite a few people over the last few years though, whose introductory rate was already higher than today’s 30 year fixed rates and they have been making their payments on time who could use a “streamline” type refinance program.
It is a complicated problem. The only real way to fix things is to quit trying to avoid taking the medicine. Delaying price decreases just prolongs the agony.
All we need is a subsidized rate down to 4.00%, just have a recapture when the home sells IF THE HOME APPRECIATED. Just pull the old farm home program off the shelf and dust it off, but without the red tape and property population requirements. Make it for purchases and refinances, not limited to first time buyers. If you purchase a foreclosure that passes the property underwriting for collateral then the rate is 3.25%. I have written to some politicians but have had no takes for lunch to discuss this. It is so much cheaper than the bail out. It will make home buying popular again, like it was from 1996 to 2003. They should even give a 1 % selling bonus to the agent and a $600 bonus to the loan officer if it is a foreclosure that pulled full price. HUD needs some new blood and maybe someone that beat the streets as a loan ranger would be a good start .