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 31st , 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.
While Congress was haggling over the housing bailout package, the Bush administration unveiled an expansion of the FHASecure program designed to make it easier for underwater borrowers to participate, in an effort to make the H4H proposal superfluous. Assistant secretary for housing Brian Montgomery said the revised program would help “hundreds of thousands of borrowers” at a hearing of the House Financial Services Committee on April 9; the official estimate at HUD was that 500,000 additional borrowers would be helped by insuring refinanced mortgages for borrowers who were up to 90 days delinquent, or those who receive a voluntary mortgage principal write-down from their lender. Now that the Hope for Homeowners program has become the revised focus for government-inspired refinancing of bad credit mortgages — a program with its own hurdles, too, it should be noted — it’s clear that HUD officials had little interest in maintaining two similar programs. Read the complete article.
