FHA Secure Refinance to Prevent Foreclosure
The FHA Secure program was designed to help homeowners to prevent foreclosure by allowing them to swap out of their high-interest adjustable-rate mortgage into a low-rate, fixed FHA mortgage.
The press release for this program states, “[FHA Secure] will help an estimated 240,000 families avoid foreclosure by enhancing its refinancing program effective immediately. Under the new FHASecure plan, FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing.”
The FHA chief had boasted about the fact that over 325,000 borrowers had taken advantage of the program, presumably allowing them to prevent foreclosure on their homes.
In yet another example of how inept our federal government is at providing solutions to ANY problem, much less at preventing foreclosure, it turns out that this number is nowhere near accurate.
According to Forbes, only 3,911 of those FHA Secure borrowers, or 1.2%, were in default when they refinanced.
So, this is yet another example of a ”Mission Accomplished” that actually failed.
This should have been expected.
For one thing, it took them forever to get this program off the ground.
Second, they instituted risk-based pricing on this product. I’m not saying that they shouldn’t have done this, but most borrowers can’t pay much more than their initial, teaser rate. The minute you add risk-based pricing to the interest rate they’re going to get, you’ve disqualified most of the applicants.
Third, many homeowners who want to prevent foreclosure are underwater- they owe more than the home is worth. That throws the loan-to-value ratio off and the loan doesn’t meet the underwriting criteria.
At the end of the day, it’s probably best for the health of HUD that they didn’t make loans to borrowers who were trying to prevent foreclosure: many of those loans are now back in default, and many of those homes are worth even less than they were a year ago.
While the write-down provision will help FHA to decrease their risk, the combination of voluntary participation by current lenders and higher rates will keep many homeowners from using the newest FHA program, as well.
The good news is that you don’t need FHA Secure to keep your home. In fact, if you handle this problem properly, you should be able to get better terms with your existing lender than you would have gotten with a new, FHA loan.
The fact is, you don’t need the government’s “help.”
Go here to get the inside scoop on how to prevent foreclosure.
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