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 Housing Wire reports that the Standard & Poor’s Ratings Services lowered Fannie and Freddie’s preferred stock rating to ‘BBB-’ from ‘A-,’ while cutting a host of other ratings as well, and warning that further cuts may be coming in the future. The ratings agency said it cut the ratings over “increasing uncertainty about whether government support will extend to these securities in the context of further deterioration” in each GSE’s assets. It further reports that it’s becoming clear that holding preferred interests in either GSE is going to be hazardous to Q3 earnings.

Shares of the two mortgage financing giants each hit a new 52-week-low. They’ve lost more than a fifth of their value on Wednesday as fears mounted that the companies will soon need government support. Regional banks and insurers hold the majority of Fannie and Freddie’s $36 billion in preferred stock, and any bailout would hang these stockholders out to dry.  Many financing experts wonder why Fannie and Freddie have not moved to a insured home loan platform like FHA.  The government has backed FHA home loans and FHASecure for fixed rate refinancing and foreclosure prevention

Dow components Bank of America (BAC, Fortune 500) fell nearly 4% while Citigroup (C, Fortune 500) was down 2.5%. Wachovia’s (WB, Fortune 500) stock fell 7%. And shares of the investment bank Lehman Brothers (LEH, Fortune 500), which is facing its own concerns about the need for more capital, plunged 9%.  “There’s a big negative feedback loop and there’s no way out of it,” Friedman, Billings, Ramsey & Co. analyst Paul Miller said in an interview. “As the stock falls more and more, it’s more likely the government steps in and more likely equity holders get wiped out.”

It’s looking more and more like the government bailout of Fannie Mae and Freddie Mac will become the taxpayers’ burden. JP Morgan Chase & Co.’s CEO, Jamie Dimon said in a Q2 earnings call that prime mortgages looked “terrible.” This is an indicator that it’s not just sub-prime mortgages with bad credit that are going sour. Even with all of the loan modifications, the home foreclosures are not stopping.

Fannie Mae has reported a loss for the past two quarters while Freddie Mac has posted three consecutive quarterly losses. Both companies are expected to report a loss in the second quarter as well.  Fannie Mae’s chief executive sought to reassure investors that no bailout is imminent. They haven’t offered anything and we haven’t asked for anything,” Fannie Mae CEO Daniel Mudd said in a public radio interview Wednesday morning. “I don’t anticipate that they will do that.”

Armando Falcon, who served for six years as Fannie and Freddie’s chief government regulator, expects a full-fledged government takeover before year-end. The companies’ financial picture is far worse than they have acknowledged, he said, particularly for riskier mortgage loans they purchased as investments.

According to a recent New York Times article, there are more than 3 million homeowners in peril, and financing analysts are forecasting over 2 million more will fall behind on their payments in the coming year as home prices fall further and the economy weakens.  Those stark numbers clearly demonstrate the challenges ahead for the lawmakers attempting to offer some relief to their voting base but also hint at what the next administration will be facing after the election. While the proposed FHA home loan program would help some homeowners, analysts say it would touch only a small percentage of those in trouble. 

According to Josh Emmons, a CFB Loan Services Manager, “this home financing bill would assist mortgage lenders and homeowners with refinance transactions for distressed home loans into a better and more affordable terms that would significantly decrease defaults, loan modifications and foreclosures.”  FHA provides a thirty year mortgage with a fixed interest rate that benefits the borrower and the government insurance protects the lenders. 

The Congressional Budget Office estimated these home loans would be used by about 400,000 homeowners and would not do much to improve the ailing housie market.“It’s not enough, even in the best of circumstances,” said Mark Zandi, chief economist of Moody’s Economy.com. The number of homeowners who will be assisted “is going to be overwhelmed by the 3 million that are headed toward default.”

Last week, the Senate voted overwhelmingly to advance the mortgage bill, and the House passed a version last month. The Senate, where the bill was delayed by a disagreement over other measures, is expected to come back after the July 4th recess and pass the mortgage aid bill.

Democratic leaders say Congress could send something to the president before lawmakers leave Washington in August.  The White House, which initially threatened to veto the measure, has indicated that it is open to supporting the bill if certain provisions are removed. “The Congress needs to come together and pass responsible housing legislation promoting foreclosure prevention that helps more Americans keep their homes,” President Bush said on Thursday.