Posts Tagged ‘fha’

Federal plans for helping foreclosure victims had been drawn up and introduced last August but panelists at a meeting of bond organization feels that it is too narrow to meet all ends. Within the American Securitization Forum a study was done and it reported that the FHA Secure loan refinance operations should be broadened so as to include more types of foreclosures. It should permit borrowers delinquent on payments for any reason to be able to refinance into a loan backed by FHA. But as it is the terms are too narrow and leaves out many from its ambit. The net result will be that foreclosure numbers will continue to increase with the rise in interest rates.

Against the backdrop of falling real estate market foreclosures will be reigning supreme. FDA Secure has so far modified about 1,000 loans only and thus cannot be termed a success but rather a failure opined Rod Dubitsky the managing director of Credit Suisse at the panel meeting.
ASF has other alternative plans that are not available to servicers currently. The plan would be the only tool that would permit short refinancing. By it a borrower would be allowed to refinance the mortgage even if the pending loan amount was more than the value of the property. The general idea amongst all is that modifying loans is a much better option than accepting foreclosure. Lenders have come forward of their own accord to give a push to modifications but the number benefited is far short of the estimated target.

The current FHA plans are not appealing because the lenders will have a tough time selling the loans. Dubitsky commented that FHA is pressurized by traders to keep its loans out of standard Ginnie Mae bonds which are valued for their liquidity.

On the other hand since house owners with nil equity are at most risk the programme must immediately allow short re-financing. If not the very purpose of help will be defeated. Short refinancing is not a distress sale – the borrower will be able to continue to stay in the house. It will thus address the problem from the socio-economic angle.

The current plan will help merely 4,000 sub-prime borrowers or 5% of those who are two months behind payment. But if the new proposals are accepted then 607,000 borrowers would be reached – that is 68% of the seriously delinquent.

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Since the last twelve months hundreds of house owners have been knocking on the doors of Stephani Rojas – a mortgage counselor. They are desperately seeking help as foreclosures close in on them. The majority comes when they are just about to be evicted. There is a sense of shame for having failed their families and for the same reason they are reluctant to disclose their names, income or expenses. They do not want to say how many instalments they have missed. Some just collapse and shed tears. Stephanie feels that it is akin to talking to disaster victims. The sufferers have no idea about the rules of the game and are just aware that any day the Sheriff’s men will come and throw their belongings out on the road.

It is the same story with counseling agencies right across Lower Hudson Valley. Most of the foreclosure victims are first-time buyers of property with low income and questionable credit who tried to change their lives by taking advantage of the sub-prime ARM’s. Instead they have been gifted with foreclosures when interest rates began to spike.

Veline Acquah is another such foreclosure counselor at Mount Vernon. She underlines the importance of seeking timely help even before receiving the foreclosure notice. Timely intervention is of invaluable importance in these cases. But once the ball starts to roll it is difficult to bring it back. Time is the key.

Sonyma AND FHASecure ae some programmes launched by New York State and Federal Government. These are for those house owners who have taken ARM loans and are not lagging behind more than two months in payments.

Once the counselor has the relevant details from the foreclosure victim – income, expenses and present capability to make payments after granting of concessions, he or she will be able to negotiate with the dealer for a viable amicable solution that will allow the borrower to continue to live in the house that is the home.

The lenders have some options relating to the circumstances of the borrowers – his or her credit ratings, repayment ability and whether the trouble started only when the rates were increased or because of personal reasons like illness or divorce. In other words is the nature of the problem short or long? The answer to all these questions will be matched by the best solution under the circumstances.

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One can hear the clink of the sword – it is expected to be brandished any moment. The Bush administration has come to an understanding with jumbo lenders and a freeze will be announced for five years. These are the lines of expectation. No details are as yet available.

The reaction to the news in Detroit even without official confirmation is positive. At least the government is doing something. In Michigan the foreclosure problem is exacerbated with unemployment issues –7.7% unemployed. It is the highest in the nation. This point alone will determine how effective other palliative efforts on foreclosures will be. The problem is jobs. Let the people have jobs and foreclosures will automatically be arrested – is the view of many.
In Lansing the state legislature passed a law lowering fixed rate loans but it is unsure what its fate will be in the Senate. Lately Washington has been showing increasing interest. The Federal Housing Administration has been modernized. It can raise more amounts for lending purposes and stringent laws have been passed to rope in predatory lending. Democrat Debbie Stabenow from Michigan has brought another proposal for waiving taxes on those mortgages that are settled for less the original value of the loan. Stabenow rues the slow pace of action because it is speed that is of vital importance in this matter. The delay is also being questioned. Some want quick fixes while others decry hasty action might lead to more foreclosures. Republican Walberg voted against a law that would curb aggressive lending saying that this would result in less money being available for loans, which would have an adverse effect on the entire market. However he clarified that he was in general for regulating the industry. This is especially required in Michigan that has no controls over agents.

An appropriation bill is most likely to be passed for sanctioning $200 million to non-profit organizations engaged in foreclosure counseling. Counselors play a key role in resolving the delicate issue of bringing together borrowers and lenders to thrash out matters amicably.
Meanwhile everyone is waiting with bated breath for the final announcement by Bush. The President has always harped on the fact that the taxpayer’s money should not be used to bail out those who had made lousy loans. It leaves many questions unanswered – who are going to benefit and how are the lenders going to react?

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For any real estate related problem like foreclosure the FHA can be contacted for genuine help. It is a semi-private agency controlled by the government. The aims are to help those with slim purses to become owners of houses. FHA does not itself advance loans but it negotiates with lenders to make the loan taking process smooth and easy.

The FHA has launched many programmes that have become popular. As per the 203(b) plan a 3% down payment can be made on a mortgage and not the usual 20% for purchasing or refinancing a house in which the owner wishes to reside or is residing respectively. There is however the condition that a mortgage insurance premium of 1.5% of the principal loan has to be added to the loan amount. That apart a monthly insurance premium on the mortgage calculated to be 0.5% of the main loan has to be paid. This will continue until the loan-to value ratio is 78% or equity of 22% has been built up.

Another programme is FHASecure. It is for people who have good credit ratings and have so far timely paid mortgage dues. This plan will help the borrowers to refinance their mortgage. This programme will save about 240,000 families. Here again there is a condition that those who are eligible for this plan will have to pay mortgage insurance premium. This will take care of the risk FHA is taking without burdening the taxpayer as regards insurance funds. The rate will be calculated according to the risk status of the borrowers. Those standing on shaky ground will have to pay more. The pricing schedule will come into effect from 1st January 2008.

To be eligible the borrower must show that there has never been any previous failure in timely repayments until the time of resetting as well as an unbroken history of employment; the present income must make repayment affordable. Thirdly only those will qualify whose mortgage interest rates fall under the anvil of resetting between June 2005 and December 2009. Fourthly the borrower must have at least 3% cash or equity on the property.
FHA schemes are for good borrowers but who were tricked off the course into high cost loans by initial teaser rates and other blatant temptations. Most of the victims are minorities who need a safe anchor to hold on to which will secure their mortgage and prosperity.

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If President Bush has his way then the residents of Las Vegas victimized by the foreclosure crisis will heave a sigh of relief. The President does not think it is a bail out operation to help lenders and speculators but is meant to help borrowers who are in the soup worried about the roof above their heads blowing away.

Christine Young based in Henderson is just one among the many boiling in the cauldron. Her property unit consisted of a 2,000 square feet four bed roomed house. About a year ago she had refinanced it under the impression that she was moving into a fixed mortgage scheme. But that was not so in reality. Within a year the ARM shot up beyond her means. It is $700 more with the due date of 1st September looming ahead. Christine squarely puts the blame on predatory lenders. They shrewdly trapped her to sign a mortgage that she had tried desperately to avoid. The smart ways of the mortgage agent made her gullible to his sales talk. At that time she thought him to be a nice honest fellow.

There are thousands of Christines across the length and breadth of the country ready to tell the same tale.
Nevada ranks first in the foreclosure race. The filings have gone up by 93% from what it was the previous year.

Last Friday President Bush detailed steps the federal government would take to help the besieged borrowers. He repeatedly assured that his focus was not to save the lenders and speculators who are also in the red. He emphasized that this operation will give Americans with a good credit past, but cannot bear the burden of recent rises, to refinance into FHA mortgages that are insured.

Pam has yet another story to tell. She had put her house on the market shelves many months previously. She was hoping to sell before the house foreclosed. In this way of direct selling she calculated on cutting down her losses. The initial asking price was $389,000 but now she has climbed down to $299,000. It meant her losing $90,000. Even then she would be lucky to sell it off right now without further loss.

The plans of President Bush will not help the Christines or the Pams because even if sanctioned it will not come fast enough to stop more heads from rolling.

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Federal Housing Administration (FHA) is a part of the Housing and Urban Development (HUD). FHA offers different insured mortgages programs such as Section 203b Insured Mortgage, Section 255 Home Equity Conversion Mortgage (HECM)-Reverse Mortgage, Insurance Premium refunds, Graduate Payment mortgage Insurance (Section 245) etc. FHA also offers Down payment grants such as the AmeriDream, Nehemiah Program, Housing Action Resource Trust (HART), Consumer Debt Solutions and Partners in Charity. The FHA loan rates offered are 6.128% APR for 30 year fixed and 6.241% APR, for 15 Year Fixed.

Let us now consider some of the individual programs that are offered by FHA. The 203 (b) mortgage Insurance provides mortgage insurance for individuals who are going to purchase or refinance a property. The loan sanctioned is offered by a lending institution or a bank and it is insured by FHA (HUD). The Section 255 Home Equity Conversion Mortgage or reverse mortgage offered by the FHA can help senior homeowners age 62 and above to convert the equity of their home into a regular stream of income which is repaid when they no longer occupy the home. The FHA Premium refunds and Distributive share is a program under which the FHA commissioner decides how much of the premium should be refunded when a loan is terminated. There are certain criteria for qualifying under the premium refund program. The eligibility are that the loan should be acquired after 1^st September 1983, paid-up an upfront mortgage premium at closing and a non-defaulter on the mortgage installments.

The FHA also offers different down payment grants. The AmeriDream program of AmeriDream, Inc. offers low and moderate income families to help get home ownership. AmeriDream, Inc. is a non-profit organization that offers ten percent of the money for a mortgage down-payment or for closing a mortgage. The eligibility for the AmeriDream Inc program is that the individual needs to qualify for a loan from any financial institution. There is another program offered by the FHA which is known as HART. Under this program offered by Housing Action Resource Trust, potential homeowners are offered assistance to buy a home. The gift fund offered by HART can be up-to $15000 which is non-refundable.

The different schemes offered by FHA have help American’s build their own homes and live the American Dream. All these initiatives have led to a record 67.7 percent people in America owning their own homes in the year 2000. This figure of home ownership is the highest ever recorded in American History ever.

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