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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!
In addition, Commissioner Clark relayed the latest news about the FHA program’s default rates. With nationwide foreclosures hitting new records every month, the astonishing news from FHA is that their program has experienced a drop in its foreclosure rate from 1.74% in 2004 to 1.45% for fiscal year 2007 which just ended. This is a strong argument that the FHA underwriting and loss mitigation models are holding up under severe pressure from a declining housing market.
Come on Senators, don’t you think maybe it’s time for the Senate to make some progress on the FHA Modernization Act which has been languishing without even being assigned a bill number since September 19, 2007?
Commissioner Clark attributes this success in dropping the foreclosure rates to HUD’s extensive foreclosure mitigation program. “In fiscal year 2007, FHA provided loss mitigation support to 91,000 borrowers, 86,500 of whom were able to keep their homes.” said Clark. “While not every one of these borrowers will be successful in the long term, historically 89% of all borrowers who benefit from loss mitigation still have active loans 2 years after the assistance.”
This is a unique opportunity to take one federal program which actually does seem to be working and use it to help out many homeowners facing financial ruin. There is some bad news in the report as Commissioner Clark also pointed out that industry sources indicate that more than 40% of delinquent borrowers fail to respond to contact from the lender until it is too late.
Borrowers - Please, if you are having difficulty with your payments, don’t hide your head in the sand. Lenders are under considerable pressure to cooperate and work something out with you. HUD has set up the HOPE NOW Alliance with the participation of most major lenders and offers counselors to help you work with your lender. They are just now ramping up operations, but already have counselors available. The number to reach them is 1-888-995-HOPE. As you can see HUD has considerable success helping out borrowers in financial distress.
The full text of Commissioner Clark’s testimony is available here.
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