- Taxes on some wealthy French top 100 pct of income: paper
- North Korea fires short-range missiles for two days in a row |
- Israel warns against Russian arms supply to Syria
- Winning ticket for $590.5 million Powerball lottery sold in Florida |
- Toyota plans to increase lithium-ion car battery output-Nikkei
U.S. government subprime effort off its pace
WASHINGTON Dec 17 (Reuters) - A program unveiled by U.S. President George W. Bush in August that is trying to save tens of thousands of homeowners from foreclosure has aided just 266 borrowers so far, according to government data released on Monday.
The initiative, which helps high-risk or low-income borrowers win better loan terms by insuring mortgage payments, targets recent homeowners whose loans have a built-in interest-rate spike that made them miss a payment.
More than 1.8 million borrowers could face mortgage rate spikes by the end of next year, according to the Federal Reserve Board, with the mortgage costs rising $350 a month.
Until Bush relaxed the rules, borrowers who missed a payment would not have been eligible to refinance under the Federal Housing Administration -- a program from the Depression era designed to make home ownership more affordable.
Officials behind the new initiative, called FHA Secure, said it is on track to move 60,000 delinquent borrowers into stable, fixed-rate home loans.
But between September and mid-December, only 266 such borrowers have cleared all FHA hurdles, according to data compiled by the Department of Housing and Urban Development that was provided to Reuters.
FHA Director Brian Montgomery said the program was off to a slow start but is overcoming bureaucratic challenges and gaining momentum even as the national mortgage crisis worsens.
"Remember, we are flying the plane as we are fixing it," he said.
The number of lenders willing to process the new loans has more than tripled to over a thousand in the last month, Montgomery said of FHA Secure.
"We stand by our estimates, at the end of the day. These numbers (of borrowers) are increasing every week. Not quite doubling but close to it."
Officials at the U.S. Department of Housing and Urban Development note many of the 3,200 delinquent borrowers who have applied for a new loan since September but have not won final approval may yet be accepted.
MORTGAGE PROS HAVE DOUBTS
Still, some of the mortgage brokers and lenders who must sell the new program say it too cumbersome and narrowly focused to help many borrowers.
"I think the concept is great but I'd like to see the people who are even doing these loans," said Yamila Ayad, a mortgage broker in San Diego, California.
FHA Secure cannot reach most southern California borrowers whose home prices have slipped but are still valued higher than $362,000, the upper limit of loans FHA can insure, she said.
Many lenders will have to forgive some of the loan amount or agree to stand at the back of the repayment line before FHA programs will work for many California borrowers, Ayad said.
Working out such new terms with individual borrowers and lenders will be a time-consuming challenge.
"We are going to try this with two guinea pig borrowers," Ayad said of the complicated refinancing work that lies ahead. "We are going to see if borrowers would even agree to this and then see if we can make it work for other people."
For all of its shortcomings, the FHA program could be open to more troubled borrowers under legislation that passed the Senate on Friday and promises to raise the loan limit to $417,000. A companion bill in the House of Representatives would raise the limit to as high as $829,750 in some areas.
If both chambers can agree on a compromise measure and Bush signs it into law, FHA could help an additional 200,000 struggling borrowers, its administrators say. Many of those borrowers turned to the easy terms and quick credit of subprime mortgages that have a built-in interest-rate spike.
Before FHA Secure can succeed, some mortgage professionals said, it must gain wider acceptance within the industry.
"We do not have a book of subprime business to identify these subprime borrowers," said Dave Greige, an FHA loan specialist in St. Louis, Missouri. "The subprime mortgage servicers out there need to let their borrowers know about this program." (Reporting by Patrick Rucker, Editing by Chizu Nomiyama)
- Tweet this
- Share this
- Digg this