FHA is now New Century, IndyMac, Wamu, Lehman and Countrywide all rolled up into one.
The failed $300 Billion Hope For Homeowners (H4H) program that the markets heralded when it was announced is getting revamped. This is because it was a bad idea - only 100 applications have been submitted as of Oct 1st. Hear that?!? 100 applications. 100 freaking applications! Its no wonder in the universe why there is no faith in the solons.
Remember Dodd and Schumer pumping this with all they had? If they would have just called me, I would have told them it was fundamentally flawed - I wrote about it several time. Now this is just more tax payer money already ear-marked that they will spend however they want. Their choice is to spend the money on more bad loans.
The reasons for failure are simple - banks do not want to participate because they have to write principal balances down too much and waive second mortgage liens. Getting a bank to waive principal is next to impossible as you know. That is the primary reason for every foreclosure prevention plans failure. Additionally, borrowers simply don’t qualify without exotic-type loan programs.
So, what is the solution that FHA came up with? You got it - to change lending guidelines turning FHA into an exotic lender giving borrowers exotic loans. It gets better - they are giving these loans to troubled borrowers in default with their present lender. Brilliant!
FHA WILL NOW BE THE BIGGEST EXOTIC, HIGH LTV and HIGH DEBT-TO-INCOME RATIO lender around. Actually folks, because FHA is a government agency you and I are taking the hits for all the losses to come from this program. If this style of lending caused the great mortgage and housing meltdown in the first place, why would issuing new loans in the same manner to previously defaulted borrowers have a different outcome?
Once again the government is changing the rules to bailout the banks - see underlined sentences in bold below. This program does waive principal which I condone, but with high housing debt-to-income ratios, 40-year terms, and near 100% LTV’s allowed, borrowers are better off renting. When the value of their homes drop another 25-50% in the next two years, they will walk away and rent anyway.
The mortgage and housing crisis can be solved. It will be a painful and expensive process but it is far better than the alternative and throwing $300 billion of sh** against the wall every month to see if it sticks. I write about it in yesterday’s The Great Mortgage Modification PUMP - GOD SAVE US ALL - Best Mr Mortgage
source: mrmortgage
link to the original post:
$300 Billion in Exotic Mortgages Now Available
Fort Lauderdale Blog and Real Estate News
Rory Vanucchi
RoryVanucchi@gmail.com
http://waterfrontlife.blogspot.com
www.FortLauderdaleLiving.net
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