Paul O’Neil, former Bush Treasury Secretary, proposed a solution to prevent foreclosure crises in the future. His comments were featured in National Realty News. [Thanks to Tim Iacono's blog post.]
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It appears that the new push is to prevent foreclosure problems in the future by educating prospective home buyers. FNMA just announced that it is requiring pre-purchase counseling for any borrowers using its MyCommunityMortgage program, as well as any other loan requiring nontraditional credit to qualify.
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It used to be, way back in 2005, that if you were working with a borrower who was behind on payments, you smiled when you learned that it was an FHA loan, because you knew that HUD foreclosure prevention programs were solid and reliable.
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In some ways, the interests of the mortgage insurance companies are more closely tied to homeowners who are trying to prevent foreclosure than anyone else involved in the foreclosure process. Housing Wire recently reported that Genworth Financial is expanding its pre-purchase education efforts to inform borrowers about their options if they fall behind on payments and need to prevent foreclosure.
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One of the key selling points of the Foreclosure Prevention Act was that it was projected to prevent foreclosure for “at least” 400,000 homeowners. I’ve noted that there are more questions than answers about this legislation delivering on its promise of foreclosure prevention.
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Chapter 13 bankruptcy is often sold to homeowners as a “wonder drug” method to prevent foreclosure when they’re behind on payments. In our pop-a-pill culture, it seems that our first reaction is often to reach for anything that promises immediate relief.
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In July, I posed the question, “Will Mortgage Companies Take Advantage of the Foreclosure Bill?” With several logistical obstacles just off the top of my head, I predicted that there was no way that lenders were going to be able to handle Foreclosure Prevention Act mandates.
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Warren Buffett and Bill Gross of PIMCO commented earlier this week that the proposed government bailout program could actually turn a profit. However, Mr. Buffett qualified that comment by saying that was contingent upon them buying these loans at the right price.
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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.
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