2007 BAILOUT update “FHA Secure iniative”

[HLS]

For the FHA program, Here’s my understanding so far..

a)Owner occupied properties only.

b)NON FHA-ARM loans that have/will reset between June 2005-Dec 2009

c)You can be current or delinquent AFTER the reset, but must have been current for at least 6 months prior to reset, no late payments.

d) Must have 2.25%-2.85% equity, OR/AND bring in cash or get a 2nd that will NOT be covered.

e) FULL DOC ONLY

f) Qualifying ratios are 31% of income for the mortgage payment AND 43% of total income as debt (DTI)

g)Applications signed through 12-31-2008

h) Loan Limits per FHA guidelines.
(San Diego and Riverside counties Single Family is $362,790)
*********************************************
Typical govt guidelines, although they state that resets can be as far out as 12-31-09, You must sign application by 12-31-08.

There is no direction on “debt relief” 1099-C etc.

There is no mention of credit score minimum, or mortgage insurance above 80%, but I assume it WILL be added.

If you owe more than the property is worth, this “iniative” isn’t going to help you without some other sort of relief program.

It’s not really a bailout, it’s a Full Doc Refi option to a high LTV, with mortgage insurance, IF you can qualify.

It’s still open season on negotiating with your existing lender to reduce principal amounts, with or without a 1099 reported to the IRS.

The removal of the debt relief burden hasn’t been addressed yet, as far as I know.

[bsrsharma]

Seems like minimal taxpayer impact; right?

[Arraya]

That is a pretty narrow scope for SD. Possibly there are a few condo owners that purchased before 03 that it applies to. Not much else…

[SD Realtor]

No such thing as minimal taxpayer impact. However limited this is, however much it will not affect things, it is just wrong.

SD Realtor

[cr]

Agree on both accounts – minimal actually benefitting from this, but still wrong. Somewhat makes me wonder if it’s designed more to quell complaints and ease investors, or actually benefit some people.

I tend to think, and hope this will only benefit people who defaulted because of job loss, in non-mortgage industries. Then again there have always been foreclosures, so I go back to agreeing with SDR that this is wrong.

I’m going to resubmit my request to the FHA for my share of some money to help me afford a home.

[Arraya]

SD R,

I wholeheartedly agree. However, politicians wasting money on unethical ideas is nothing new and as long as it does not artifically prop up the market or bail out out too many “scammers”, I’m not going to raise my blood pressure over it. There are bigger wastes of money to get angry about.

[HLS]

It’s a nationwide plan… I wondered why the original estimate was only going to help 80,000 people out of 2 million that were in trouble, now it makes sense!!

There are a fair number of reset problems in OH, MI, IN, IL, KY, TN, PA. This plan might help some of them, it isn’t going to help anybody who did 100% financing OR an option ARM and owes more today than the property is worth.

It will help those who had a down payment and got an ARM with a reset that they cannot afford. I believe it’s still a small % of people in trouble.

I’m sure there is still talk about a larger bailout plan, it remains to be seen what will still happen.

AND for the record, it’s an initiative, not iniative 😉

[Eugene]

This recipe seems to be aimed squarely at subprime borrowers of 2005-2006. (They and flippers are the ones doing most foreclosing nowadays) Average subprime loan taken out in 2005-2006 was $199,000, 92% adjustable-rate (mostly 2-year), 91% owner-occupied.

First of all – can you get enough subprime borrowers into this program? Only 50% of subprime originations were full-doc in the last few years. Even those were often qualified at teaser rates.

Second of all – even if government manages to roll out this plan in time, it will not save the housing bubble. Here in South California, for example, subprime isn’t really a big problem. LA/SD houses are too expensive. That’s why we don’t see as many foreclosures as some other places. (as of ’06, 9.6% of all mortgages mortgages in SD were subprime. Compare with 18% in Vegas, 20% in Riverside and 23% in Miami) Prices are falling anyway.

[Anonymous]

I’d argue this is a pretty reasonable program. Looks like it really is only for those folks who would be able to afford the house except for the ARM reset.

[Ex-SD]

I am against ANY bailout program for people who cannot mange their finances. That being said, this isn’t going to do anything for homeowners in CA because 99.9% won’t meet the equity requirement and they will exceed the maximum loan limit standards for FHA. Then we have the debt/ratio requirements. Nope………not going to do one thing to stop the slide from continuing in CA.

[Anonymous]

In the interest of full disclosure, I am a mortgage broker and am qualified to close FHASecure refinance transactions. That we know of, we are the only lender getting referrals from HUD. There are several facets of the program which are just now coming out. It’s true that FHASecure allows borrowers who are in an ARM to refinance if the adjustment occurs between June 2005 and December 2009. If you owe more money on a home than it is worth, you can still refinance with FHASecure. FHA will allow a lender to hold a second behind an FHA loan with no restrictions on Combined Loan to Value. This will allow lenders holding bad paper to short pay some of the debt, but get repaid most of the debt through the refinance. All homeowners have to do is negotiate with their current lien holder who should be more than happy to entertain this type of transaction. If folks want to learn more, they can go to our web site http://www.fhasecurehomeloans.com.

[PadreBrian]

This won’t help people who took out the liar loans for 800k, and can only dti qualify for 400k. So, in that since, this ain’t too bad. It also looks like not too much tax payer money will be use…since it’s so hard to qualify.

[SD Realtor]

Chiph can you comment on the activity within the program yet? Have you originated any new loans with this? Any of these happening in California, or more closer to my home here in San Diego?

SD Realtor

[lendingbubblecontinues]

chiph-

Is the FHA going to get to see the “applicant’s income” section of original loan paperwork? Are they going to try and help re-finance non owner occupied speculation homes?

By the way, if you are one of the guys who helped perpetuate this bubble by enabling borrowers to speculate by using NINA and NINJA loans…may you forever be unemployed and destitute when this whole thing shakes out–“I’ll take that with fries please”. Otherwise, have a nice day.

[bobby]

I’m with Blueeyes_Austin on this one. Looks like it’s going to help responsible folks who were conned into a bad loan.

[Author]

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