HUD confirmed recent reports by issuing a formal letter confirming that the government will no longer off  FHASecure refinancing products. The FHA mortgagee letter, 2008-41 confirmed that the refinance program will completely disappear on December 31.  “Maintaining the program past the original termination date would have a negative financial impact on the MMI Fund that would have to be offset by either substantial across-the-board single family program premium increases or the suspension of FHA’s single family insurance programs altogether,” the letter reads in part.  Effective December 31, FHA reiterated that they t will not issue any new case numbers for FHA lenders looking to refinance distressed homeowners with FHA Secure refinance loans.  HUD however, will honor all FHA loans for which a lender has already completed a loan application and requested a case number prior to December 31^st , they said.

The FHA Secure refinance was born in the summer of 2007, administration officials suggested at the time that the refinance program could help 240,000 delinquent subprime mortgage holders avoid foreclosure. But by December of last year, four months after its introduction, the government loan program only had endorsed 266 loans for borrowers that were delinquent at the time of mortgage refinancing, forcing HUD officials to redefine the program with a wider net for any at-risk borrower, delinquent or not.  FHA officials have maintained steadfastly to the press that such a focus was always the intent of FHASecure.

Regardless, the program never seemed to gain much traction with key Democratic lawmakers, who pushed to create the Hope for Homeowners program that went into effect the past October. Part of that was because the Bush administration attempted to leverage FHASecure as a bargaining chip during negotiations over the Emergency Economic Stabilization Act of 2008, suggesting that the program could handle at-risk and underwater borrowers without the need for a $300 billion expansion to the FHA program under the Hope for Homeowner proposal.

Did you know that FHA loan programs enable a couple getting married to receive gift funds through bridal registry set up specifically for FHA home financing?  So that means instead of family and friends buying you plates and dishes that you do not want, they can invest in your home.  The Bridal Registry Account allows couples who are getting married to open a bridal registry savings account with a HUD approved FHA mortgage lending institution. Now wedding guests can deposit money as wedding gifts directly into the interest-bearing account that will be applied to the down-payment of your home. 

FHA home purchase loans only require 3% down-payments so if all goes well, you will be able buy your 1^st home by the time you get back from your honey moon.  FHA home loans provide many benefits, like low fixed mortgage rates and the ability to do a FHA streamline refinance any time the interest rates drop.

When FHA loan programs added, Hope for Homeowners, many people believed that this would stop the foreclosure crisis.  Unfortunately the FHA mortgage lenders have not responded as hoped and the program is far from a success.  Kelly Media Group president, Jason Cardiff said, “FHA needs to reevaluate the lenders associated Hope for Homeowners, because clearly they are hindering governments latest FHA refinance program.”

Don’t Get scammed by lenders pretending to offer foreclosure prevention or realtors offering short sale solutions because it won’t help your credit.

According to the recent FHA outlook report, and as anticipated in our recent post, the Hope for Homeowner program had no endorsements. In the last 2 weeks of November, there were fifty four Hope for Homeowner applications; down from the sixty nine applications in the first two weeks. Read more about the struggling H4H program here.

The Federal Reserve’s aggressive moves will likely cause more rates reductions in conventional mortgages rates to as low as 5%, said Tony Crescenzi, chief bond market strategist at Miller Tabak. Rates on thirty-year mortgage loans currently average about 5.5%.   Plus, Crescenzi predicted a “collapse” in Libor, with the 3-month London interbank offered rate falling below 1% by early January from 1.847% currently.   

The central bank’s commitment to lowering mortgage rates likely spurred buying of 10-year and 5-year Treasury notes, Spinello said. As mortgage rates drop and people refinance out of existing mortgages, dealers in mortgage-backed securities often replace those loans by buying Treasurys of similar origin.   Also helping bonds Tuesday, a report showed U.S. consumer prices plunged 1.7% in November, the fastest pace since 1947. Economists surveyed by MarketWatch were expecting the CPI to fall by 1.4%.  FHA mortgage rates continued to drop, as lender reported FHA loans featuring fixed interest rates were reported across the country.

It becomes more and more evident that the government wants homeowners to be able keep their primary residence homes and weather the storms. Clearly they will need more cooperation from the mortgage lenders and investors that hold the FHA mortgage rates continue to benefit from Fed interest rate cuts.

How will Fed Rate Cut Help Homeowners with Mortgage Rates for Refinancing? 

Furthermore, Bernanke said that the interest rates borrowers pay under the program could be reduced from the current level of about 8%, which remains so high because it is hard to find buyers for FHA loan backed securities. To fund the rate reductions, he said, Treasury could buy up mortgage-loan securities bundled by government-sponsored loan securitizer Ginnie Mae, or Congress could choose to subsidize the rate.  Bernanke also announced that would support putting borrowers into home mortgages they could afford over the long haul.  Industry sources said Wednesday that Treasury is contemplating a plan to buy mortgage-backed securities to reduce 30-year fixed mortgage rates down to 4.5% from their current 5.5% level, but it appears this plan might be aimed at helping new homeowners, not distressed borrowers seeking mortgage relief from FHA home refinancing.  He also recommended a plan that would have the government share the cost if the loan servicer reduces the borrower’s monthly payment. Current government initiatives have encouraged servicers to lower borrowers’ payments, but the plans have offered little incentive to do so. Bernanke said this approach would increase the incentive, which would “improve the prospects for sustainability.”

“We are continuing to examine potential foreclosure mitigation ideas that may be an appropriate and effective use of TARP resources,” he said in a press conference, without offering more details.  According to HousingWire, the short admission yields volumes about the battering Paulson and other outgoing Bush administration officials have taken at the hands of lawmakers and fellow regulators behind closed doors as of late for failing to “do more” to help a growing group of homeowners that cannot afford their mortgage loans.  FHA loans have been carrying too much of the mortgage load and it’s time that the conventional mortgage lenders offer more attractive home financing programs with refinance options and loan modifications.

On Nov. 12, Paulson announced that the Treasury had ditched the asset-management portion of the TARP proposal, opting instead to focus on capital purchases where most needed to revitalized lending activity and to allow banking institutions the chance to earn their way out of the current financial crisis. “I will never apologize for changing an approach or strategy when the facts change,” Paulson told reporters in a question-and-answer session after the announcement at the time.  “The most important thing we can do to mitigate the housing correction and reduce the number of foreclosures is to increase access to lower cost mortgage lending,” he said. “The actions we have taken to stabilize and strengthen Fannie Mae and Freddie Mac, and through them to increase the flow of mortgage credit, together with our bank capital program, are powerful actions to promote FHA mortgage lending.”

Not long after that pronouncement, the Fed announced on Nov. 25 that it would intervene directly in the MBS and ABS markets, using $20 billion in TARP funds as part of backstop for a plan designed to jump start frozen asset-backed securitization activity.  While signaling a softening of his stance, Paulson also remained steadfast in his defense of existing actions taken thus far, including a foreclosure freeze by both Fannie Mae and Freddie Mac that runs through early next year.  “This Administration has used a variety of authorities to reduce avoidable foreclosures, through HUD programs, through the FDIC’s program with IndyMac, through our support and leadership of the HOPE NOW Alliance, and through the new GSE servicer guidelines announced November 11 that will set a new standard for the entire industry for streamlined loan modification agreements,” he said.

Whether the new Hope for Homeowners loan guidelines will set a standard or fall short of one is clearly a matter of perception; the FDIC’s Bair has roundly criticized the plan, saying it “falls short of what is needed to achieve widescale loan modifications of distressed mortgages.” Instead, Bair has pushed for federal insurance of recidivism risk on modified mortgage loans, a move that FDIC analysts have estimated will require roughly $24 billion of TARP funding. See earlier coverage.