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WHEN HUNTINGTON BEACH, CALIF.-BASED More2Lend Financial launched its FHA Realtor Resource Center (www.FhaRealtorResourceCenter.com) in June 2008, the site offered itself as a "what next?" option for loans to challenged borrowers after the subprime market collapsed. The website was one of many passing along the news that anyone with a qualifying credit history now could take out an FHA-insured mortgage up to $729,750 in some markets and even finance the closing costs.
With the nation straining for good news about housing finance, and officials like Treasury secretary Henry Paulson saying the industry can move through the bulk of the correction "in months rather than years," the pressure has been on FHA to lend some substance to a barrage of fair-weather forecasts.
One hopeful sign is a Boston Federal Reserve Bank study showing that over half of the 2.2 million securitized adjustable subprime mortgages have no missed payments in the past year, while at least half of subprime borrowers have credit scores above 620. Following July's HUD-sponsored Foreclosure Prevention Workshops across the nation, HUD said Oct. 1 would be the start date when the new housing bill would spring into operation. Homeowners were advised to contact their local housing counselors "rather than wait until they fall behind." The announcement projected that by year's end 500,000 additional families would be helped to refinance by the FHA Secure program. Mortgage professionals generally greeted that target with some skepticism, saying FHA has been asked to do too much. Veteran Stratmor Group and IBM mortgage analyst Linda Simmons, now SVP of business development for Chevy Chase, Md.-based Overture Technologies, said it would take "longer than fiscal 2008" to refinance a projected 1.6 million troubled subprime borrowers into FHA loans, with the mortgage industry's current personnel and technology resources.
Though the administration has boasted that the new FHA Secure loan program will allow homeowners with decent credit to refinance ARMs scheduled to reset at payments they cannot afford, some call that program political posturing more than an actual solution. A spokesperson for one veteran FHA lender dismissed FHA Secure as "more fluff than substance." To make matters worse, a much-lobbied Congress has put a moratorium on FHA's risk-based pricing plan, causing some to worry that FHA may fall prey to the...