It has been 4 months since President Bush announced a new refinancing program called the FHA Secure. This new refinancing product was touted as a foreclosure prevention device and viable alternative to homeowners stuck in adjustable rate mortgages as a way “out” of their toxic loan and into a 30 year fixed FHA insured mortgage.
When it was announced, FHA had estimated that would assist approximately 80,000 borrowers.
An
article by Patrick Rucker from Reuters came out today and I was alerted to it by my good friend
Peter G. Miller of
FHALoanpros.com (thanks Peter), that the FHA Secure has helped only 266 borrowers since its inception back in August.
If you do the very simple math, they are currently helping approximately 60 plus homeowners a month and on track to complete just over 1,000 FHA Secure mortgages within a 12 months period.
The way the FHA Secure is going, it would take 80 years to help 80,000 homeowners!
So, what’s the big hold up and hold out by lenders? Why haven’t there been more of these FHA Secure refinances accomplished?
The biggest issue that I see is that lenders are simply not offering this mortgage to borrowers. What people fail to realize is that the
FHA Secure Loan is being securitized in separate GNMA pools, so HUD can track its performance. The major problem is that no investors wants to buy a higher risk GNMA pool. That’s why the lenders don’t want to write these mortgages.
Why? They can’t sell them on the secondary market.
As one reader put it;
Well now we have another bogus fix to add to FHA secure. The subprime freeze. If you examined details, it’s obvious that almost nobody will qualify for the freeze (its voluntary anyways). But they did manage to hammer the mortgage backed bond market with that announcement, as investors were afraid the government was about to start retroactively modifying mortgages. That led to a a big jump in rates.
So we have the FHA secure that no one wants to buy, a subprime freeze that didn’t freeze anything and higher rates.
I hope they don’t try to help us anymore…..
The underlying theme seems to be that the government, in taking a little-to-no public funding approach, is failing to jawbone the private market into funding formerly-high risk mortgages — even though they are publicly-insured and hence “risk free”. We would suggest that general capital flight from US markets, both from the credit crisis and due to the falling dollar, have eliminated a large fraction of the funding that would otherwise be available (perhaps half).
More on the status of the program from Reuters:
WASHINGTON, Dec 17 (Reuters) - A program unveiled by U.S. President George W. Bush in August that is trying to save tens of thousands of homeowners from foreclosure has aided just 266 borrowers so far, according to government data released on Monday.
Officials behind the new initiative, called FHA Secure, said it is on track to move 60,000 delinquent borrowers into stable, fixed-rate home loans.
But between September and mid-December, only 266 such borrowers have cleared all FHA hurdles, according to data compiled by the Department of Housing and Urban Development that was provided to Reuters.
FHA Director Brian Montgomery said the program was off to a slow start but is overcoming bureaucratic challenges and gaining momentum even as the national mortgage crisis worsens.
It is on track to help 60,000 homeowners? You are joking right?!
More from Reuters;
The number of lenders willing to process the new loans has more than tripled to over a thousand in the last month, Montgomery said of FHA Secure.
“We stand by our estimates, at the end of the day. These numbers (of borrowers) are increasing every week. Not quite doubling but close to it.”
Officials at the U.S. Department of Housing and Urban Development note many of the 3,200 delinquent borrowers who have applied for a new loan since September but have not won final approval may yet be accepted.
MORTGAGE PROS HAVE DOUBTS
Still, some of the mortgage brokers and lenders who must sell the new program say it too cumbersome and narrowly focused to help many borrowers.
“I think the concept is great but I’d like to see the people who are even doing these loans,” said Yamila Ayad, a mortgage broker in San Diego, California.
FHA Secure cannot reach most southern California borrowers whose home prices have slipped but are still valued higher than $362,000, the upper limit of loans FHA can insure, she said.
Before FHA Secure can succeed, some mortgage professionals said, it must gain wider acceptance within the industry.
“We do not have a book of subprime business to identify these subprime borrowers,” said Dave Greige, an FHA loan specialist in St. Louis, Missouri. “The subprime mortgage servicers out there need to let their borrowers know about this program.”