In a 256 to 171 vote yesterday, the U.S. House of Representatives passed the FHA Refinance Program Termination Act (HR 830)[1]. Ultimately, one Republican voted against the bill and 18 Democrats voted for it, with the vote otherwise split along party lines with Republicans supporting and Democrats against the move. While the bill did make it through the house, most experts expect it to die in the Democrat-dominated Senate and President Obama has publicly stated that he will veto the program’s termination if the bill makes it to his desk[2].
The program works with 23 lenders to refinance their homes through FHA-insured loans. However, in order to get refinances, homeowners must convince lenders to write off at least 10 percent of the unpaid principal balance. Homeowners also must be underwater but still current on their mortgage, not already insured by the FHA, have a credit score of 500 or better and a revised loan-to-value ratio of no more than 97.75 percent[3]. The $80 billion program has already spent $50 million of its funding and 44 new loans have been endorsed of the 245 reviewed. According to the FHA, the program could reach 500,000 to 1.5 million borrowers, but these numbers appear inflated based on performance so far and on other, similar claims made about HAMP and other foreclosure alternative programs.
Debate continues on the House floor about the continuation of HAMP, NSP and the Emergency Homeowner Loan Program, despite the Obama administration’s assurances that any bill that kills these programs or the FHA Short Refi Program will be vetoed if passed by Congress.
Do you think that terminating these programs is worth a shot, or should they be allowed to continue in their present forms?
Thank you for reading the Bryan Ellis Real Estate Letter.
Your comments and questions are welcomed below.
[1] http://www.dsnews.com/articles/house-votes-to-terminate-fhas-short-refi-program-2011-03-10
[2] http://www.totalmortgage.com/blog/mortgage-rates/house-votes-to-stop-fha-short-refi-program-bill-expected-to-die-in-senate/10897
[3] http://www.housingwire.com/2011/03/10/house-votes-to-end-fha-short-refi
this is the program that is most viable in my opinion. HAMP was unworkable for most people. this program makes sense. they should also go by payment history as opposed to income qual ( a failing of HAMP) and offer the lowest interest (like 3%) this would completely stabilize the market and promote growth again.
Our government needs to get out of the way of our recovery. All of the new regulation has only served to stifle any recovery. Every one of the new programs has been an overwhelming failure. Too big to fail is really too big to exist. Let these banksters take their just reward for making bad bets and writing ridiculous loans. Enough is enough already.
If it helps fine but to what cost on the tax payer? If the law is not helpful in dealing with the problem than scrap it it should have never been created in the first place!