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The Mortgage market is tough right now; foreclosures are on the rise, there is a glut of homes on the market, and no end in sight. President Bush has recently unveiled his FHA program to bail out homeowners in need. The program he plans to roll out is called FHA Secure and is supposed to help struggling homeowners with adjustable rate mortgages, no longer able to pay their mortgages due to rising payments, refinance into new, FHA secured, fixed-rate mortgages. This sounds like something we need right now, but like anything, there are two sides to this coin.
The Federal Housing Administration
FHA stands for Federal Housing Administration, and, among other things, it insures mortgages for low to moderate income Americans, allowing them to qualify for loans that they normally wouldn’t qualify for because, if an FHA insured loan defaults, the bank doesn’t lose because the loan is insured by the U.S. Government.
You see, normally the lender, or Private Mortgage Insurance (PMI) companies assume the risk of default on a home loan, however, many would-be homeowners can’t qualify for traditional loans and aren’t afforded coverage by PMI companies, so the FHA steps in to help some of those people.
How FHA Secure Works
FHA Secure is the name of the new plan to help homeowners struggling as a result of the current mortgage market woes. The program will allow homeowners with adjustable-rate mortgages (ARMs), who are late on their payments because their loan adjusted, to refinance into FHA secured, fixed-rate loans. There are a few qualification requirements, the biggest of which is that the homeowner must not have been late on any payments before the loan’s rate adjusted and the payments went up.1
Where The Controversy Lies
There is a certain bit of controversy over the new FHA Secure program, and it lies in a debate between who is at fault when a loan adjusts. Since the FHA is funded by tax-payers, there is a question as to whether tax-payer money should go to bail out homeowners who signed for the loan they were given, and thus, should be held responsible for any negative consequences years down the line, such as increasing rate and payments.
The other side of argument is that the homeowners in trouble were essentially duped into signing for adjustable-rate mortgages by shady mortgage professionals who were dishonest about the loan terms and, as such, should be given assistance to get out of their current situations.
Whoever is at fault, FHA Secure aims to solve the problem with government assistance. If you’d like to find out more about FHA Secure, you can do so at the Federal Housing Administrations Website.
Federal Housing Administration, http://www.fha.gov/about/fhasfact.cfm
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