August 31, 2007
Read Our Lips: President Bush Announces FHA Secure
Three weeks ago we pointed out President Bush’s careful choice of words when he spoke out against federal bailouts for struggling homeowners ("If you mean direct grants to homeowners, the answer would be `No, I don't support that.'"). This morning, the President spoke again.
President George W. Bush today pledged to help people who've fallen behind in their mortgages keep their homes and to tighten safeguards against predatory lending, while rejecting a bailout for ``speculators.''
``I plan to help homeowners, the government's got a role to play,'' Bush said in a statement at the White House. But, he said, ``it's not the government's job to bail out speculators, or those who made the decision to buy a home they knew they could never afford.''
Bush said he will let the Federal Housing Administration, which insures mortgages for low- and middle-income borrowers, guarantee loans for delinquent borrowers, allowing them to avoid foreclosure and refinance at more favorable rates.
Bush said that ``in the coming days'' the FHA will begin a new program called FHA Secure that will permit homeowners who have a good credit rating but can't afford their current payments to refinance into FHA-insured mortgages.
According to Bloomberg, "The president gave no estimate on the cost of his proposals. He said he also will support proposals in Congress to provide tax relief for homeowners who refinance." Is it a token act, or simply act one of an even larger production?
∙ Housing And Credit Concerns Abound (Here And Abroad) [SocketSite]
∙ Bush Pledges FHA Help for Subprime Borrowers [Bloomberg]
First Published: August 31, 2007 10:45 AM
Comments from "Plugged In" Readers
They envision funding the program by increasing rates on FHA insurance premiums. So basically, folks with conforming loans over 80% LTV will pay for it.
Posted by: Dude at August 31, 2007 11:15 AM
So is this a bailout?
Posted by: eddy at August 31, 2007 11:30 AM
Historically, there is a high inverse correlation between what BB (=Bush + Bernanke) SAY and what they DO ... so my money will ride on the bailout coming through. How will they pay for it? Heck, when did they ever stop to think how they will pay for anything? How will they pay for Iraq?
Posted by: TrailerTrash at August 31, 2007 11:45 AM
If Bush is getting involved, then failure is imminent. Everything that moron touches turns into a disaster.
Posted by: Phil at August 31, 2007 11:55 AM
There are two primary ways to stimulate an economy: lower rates or lower taxes. Guess which one the Bush crowd wants.
The democrats want to raise taxes. They can't do that if a)the economy is not robust and b)interest rates remain high. If they can't raise taxes, they can't promise the sky and the moon to low income voters. Or if they do, they face a Hobson's choice of not being able to deliver or increasing the deficit.
Bush did this to keep Bernanke from feeling that his back was against the wall and the only recourse was to lower rates if only to restore confidence in the mortgage markets.
Instead, this buys Bush some time. Ben B won't lower rates (or lower them as drastically) until they see the effect of this program, which will take a while to get put in place and take a while for the effects to be seen.
Bush waited and waited because he wants to set it up so that no matter what, Ben won't lower rates, or won't lower them as much while the market is placated and the program takes time for its effects to be seen. If Ben doesn't lower rates, the democrats can't promise as much or will risk losing big time in the next election.
FHA loans are for very low amounts, though they might raise them a bit. And the qualification standards to refinance a subprime loan are that you have to prove you have the means to pay it back.
So this doesn't help high price states like California and New York and it doesn't apply to the vast majority of sub primers (they won't qualify), so, similarly to cutting the discount rate, it didn't really serve any purpose other than to calm the markets.
I thought this was walking the perfect line between compassionate and conservative and it has taken the wind out of any bailout proposal. He may not know how to run a war, and this election is toast, but he knows how to screw the democrats out of the next election. He didn't help housing much, but he has helped the republican party and those whose taxes would have gone up the most if the democrats are given a blank check.
Posted by: tipster at August 31, 2007 12:18 PM
"FHA estimates it can help an additional 80,000 homeowners qualify for refinancing"
If the average mortgage is $250k, this will "bail out" $20 billion of the $600 billion of mortgages that will reset over the coming months. That seems too small to really help the market, in my opinion.
Posted by: db at August 31, 2007 12:37 PM
Nothing like a kiss before getting ... whoa!! I still don't read Bernanke's Jackson Hole speech as a point blank indication they're going to cut the Fed Funds target rate on September 18th - but I seem to be in the minority after reading the WSJ Online. The Worst President Ever is just trying to make up for his lack of lifting a qualified finger to help the Hurrican Katrina victims out two years ago with this FHA thing - doesn't it make you feel go to know politics instead of practicality is driving the spending of our dollars?
Posted by: Jamie at August 31, 2007 1:43 PM
"If Bush is getting involved, then failure is imminent. Everything that moron touches turns into a disaster."
Gee Phil, thanks for your insightful comments. Any other pearls of wisdom? Can we save the partisan hack jobs for the political blogs.
Posted by: KK at August 31, 2007 1:49 PM
this FHA bailout isn't going to do much. I think a 250K estimate for the mortgages at issue is too high. FHA loans tend to be for much lower amounts and the median housing price is only about 230K. I wouldn't be surprised if it ends up being less than $10b when all is said and done.
Posted by: anono at August 31, 2007 1:50 PM
kk- spare us the self-righteousness. This post is about a government bailout (or program, if you prefer) to ameliorate the effects of the housing downturn on low income borrowers. It is being announced by the President. If one believes a government official to be incompetent and ineffective and that official is now announcing a program to help low-income mortgagees, it is reasonable to opine that said program will also be ineffective and incompetently managed.
On a note related to the plan- doesn't this program really seem designed to help out only those who were misled into taking out subprime loans instead of going to FHA in the first place? FHA has pretty tight standards to qualify for a loan so if someone qualifies now, they probably qualified 2 or 3 years ago. The big article on Countrywide in the NY Times this Sunday included allegations that Countrywide steered borrowers who could have qualified for FHA loans into disastrous subprime products that produced high commissions.
Posted by: anono at August 31, 2007 2:02 PM
Anono- spare us the self-righteousness.
No matter how certain posters here may feel, the stock market was quite pleased with W's and Bernanke's comments today, and anything that bumps my net worth is fine by me. If the market likes it, the H8rs are beyond irrelevant.
Posted by: AC at August 31, 2007 2:42 PM
Tipster wrote "So this doesn't help high price states like California and New York and it doesn't apply to the vast majority of sub primers"
The electoral college in CA and NY are already lost causes for the GOP and hence irrelevant. In the heartland states, where the GOP's votes reside, conforming loans and low FHA limits are enough to tilt the boat
Posted by: Cynic at August 31, 2007 5:00 PM
2010: Look for the debut of "Resolution Trust Corp: The Next Generation"
Posted by: Emmett_Brown at September 1, 2007 8:48 AM
I doubt these loans will go bad because I doubt there will be very many of them at all.
A realtor did an analysis on Craigslist and found that under FHA secure, most people's payments will nearly DOUBLE, and they'll have ratios that make them unable to qualify.
Read the right hand side of this page. It's an eye opener:
Posted by: tipster at September 1, 2007 1:13 PM
I feel that it's about time that the gov't is stepping up to try to do something to help out ALL of the people who are losing their homes. I fell victim to Ameriquest, now I'm left with an ARM, on a home that was overappraised, and a payment that's going to adjust in Feb 2008. If there's something that can help, I want to check it out.
Posted by: AJM at September 3, 2007 3:45 AM
It's always good to hear from someone on the front lines who is actually going through this. Too much of our discussion on this forum is speculation. Would you be willing to share with us exactly how Ameriquest victimized you?
Posted by: diemos at September 3, 2007 9:22 AM
The reason that many people did not take out FHA loans in the past few years is due to the fact that only 18% of mortgage brokers are FHA approved or (HUD) approved. This means that most mortgage companies had no choice but to offer subprime loans as the qualifications to become FHA approved are exteremely difficult for most mortgage brokers. There is a required net worth, audited financials, etc. Supposedly they are making it easier to obtain HUD status this fall.
Most of us in the mortgage business in the last few years saw this thing coming a mile away, unfortunatley. The funny thing is, that Bush is the person who pushed homeownership early in his tenure and this has resulted in very easy to qualify loans, which of course have defaulted at record highs in the last couple of years. The rooster has come home to rest, so to speak and its going to get worse before it gets better.
Posted by: Frank at September 4, 2007 5:36 AM
I got an ARM on a house that was overappraised by at least $10,000.00 No one will refinance me and my payment is going to "adjust" in Feb 2008. I am building no equity in the home and there is no escrow. I got to use my income tax refund to pay the taxes and insurance on this house. Ameriquest sent me a settlement form. I'm due back a "big" 150 bucks. I got to turn the form in by Sept. 10. I don't even know if I should sign it. Good Luck to everyone going through something similiar. Any advice would be appreciated.
Posted by: AJM at September 4, 2007 2:37 PM
To answer your first question: do you have any idea what your LTV (loan to value) is? In other words, what your house is worth vs what is owed? You can get what is called a "rate and term" loan through FHA at 97.5% of your homes worth. You cannot get any cash out, but at least you can possibly refi the home at an excellent rate. Probably somewhere around 6.5%. FHA loans are much easier to qualify for as well.
Your second question: definitley sign for the settlement offer. Ameriquest has shut its doors and you should take the money while its still there, I wouldn't plan on any windfall from them. Hope this helps.
Posted by: Frank at September 5, 2007 5:44 AM
Thank you for the advice. It's the first real good piece of information that I have gotten in a long time. I will go forth with your advice to get the home appraised and then try to contact FHA for a loan. I really appreciate the advice. I'll let you know how it goes. Thankyou AJM
Posted by: AJM at September 6, 2007 6:29 PM
And this moron’s plan is what? We can already refi people with good credit FHA… what has he changed?
I still like Trailers comment.
Posted by: pk at September 7, 2007 9:12 AM
If this program stems the crisis we are in who cares if it is a bailout. We either refi people into a better financial situation or watch our economy slide because of instability in the housing market. FHA Secure will help people who otherwise could not get help under the old guidelines. I feel the real political reason for FHA Secure and reverse mortgages (backed by FHA) is that no politician in Washington DC can get anything done about our social security mess.
There is a web site, www.fhasecurehomeloans.com, which has a link to a letter from HUD. This letter looks like FHA Secure is available today. Go to the home page and navigate to FHA News. Under 'Press Releases' you will find the letter from HUD dated September 5th, 2007.
It looks like this "morons" plan is an attempt to get around the partisan stalemate we have today in DC.
Posted by: TC at September 8, 2007 12:37 PM
I canvas through neighborhoods, passing out flyers for my husband's carpet cleaning business.I just see all of these "for sale" signs everywhere. Just whole streets littered with these "for sale signs" in front of houses. What is going to happen to all of these houses? I talked to a landlord aquaintance of mine and asked him if, because of all of the houses being foreclosed on, if he is seeing an increase in demand for his rental properties. He told me that his business was the same as usual, but that all of the other landlords he knows are losing their houses, because of all of these adjustable rate mortgages. What is going to happen to all of these houses, all of these neighborhoods, and most importantly, all of these people. Someone has got to do something.
Posted by: AJM at September 16, 2007 4:12 PM
FHA? 2008? MAYBE... BUT NOT UNDER THE PRESENT OFFERING FOR 08. Maybe to charge risk based premiums? - up-front premium? - and a annual premium for loans w/limited down? - this can be a "tamed new animal" for 2008 but; only for the chosen ones who know how to apply the reasoning of creative financing methods, and common sense lending practices.
Posted by: finely tuned and polished at September 27, 2007 11:52 AM
AJC, you seem a little jadded. If you do just a little research, you would find that FHA Secure is available right now for most of the people who are in trouble because of ARMs. And, loan limits are going up significantly, which helps a bigger segment of homeowners. There is no need to get "creative". The refinance solution is pretty straight forward.
Posted by: TC at October 3, 2007 3:15 PM
After all we have been subjected to by the George W(orst ever) Bush Administration, why start believing him now. Sure, they are helping out mortgagees in the red, heartland states so the Republicans will once again get the votes in 2008.
The bitter truth is that our incompetent president and his greedy backers could not care any less about average people and whether they keep their houses or not. Face it!
Posted by: TonySF at December 8, 2007 4:13 PM