Posted on 03/09/2012 4:19:26 AM PST by IbJensen
CNSNews.com) – Wth no authorization from Congress, President Barack Obama has announced that his administration--through the Federal Housing Administration--will insure refinanced mortgages for 2 to 3 million borrowers without verifying their income or even if they hold a job, according to the Department of Housing and Urban Development (HUD).
Obama announced his latest mortgage program at a White House news conference on Tuesday.
Any American with a mortgage insured by the Federal Housing Administration (FHA) endorsed on or before May 31, 2009 and who is current with their mortgage payments would qualify, according to HUD.
No additional underwriting, or examining the verification of income, employment status or creditworthiness, will be done.
“Basically that’s because they already have an FHA loan and that’s just refinancing the same loan,” HUD spokesman Lemar C. Wooley told CNSNews.com.
Wooley further explained in an e-mail, “Even if their circumstances have changed, they are still managing to be current on the original higher priced mortgage, so that’s the proof to the FHA that they can handle the lower payments.”
“The streamline refinance process is only available for FHA-insured mortgages that are performing – the borrower is paying the mortgage,” Wooley said. He added, “By not requiring verification of income and other underwriting requirements, FHA reduces the cost of the transaction, as well as the time it takes – all to the mutual advantage of the borrower, the lender and FHA.”
Underwriting is generally done for both initial mortgages and refinancing, said Reed Piano, managing director of the National Association of Mortgage Underwriters. He said the normal mortgage underwriting process checks “employment verification, income verification, analysis or thorough examination of a borrower’s creditworthiness based on a lender’s requirements, any federal or state requirements.”
When an institution does the underwriting for a mortgage, it is "validating the entire process. They are validating the appraisal, the title, the credit, income verification, pretty much everything from A-to-Z and they’re seeing if the file is good and meets the requirements,” Piano told CNSNews.com.
The White House estimates 2 million to 3 million FHA borrowers are eligible. “While it is always difficult to estimate participation in these programs, this will result in significant monthly savings for hundreds of thousands of families,” a White House news release said.
“Today we’re taking it a step further--we are cutting by more than half the refinancing fees that families pay for loans ensured by the Federal Housing Administration,” Obama said at the press conference on Tuesday. “That’s going to save the typical family in that situation an extra $1,000 a year, on top of the savings that they’d also receive from refinancing. That would make refinancing even more attractive to more families. It’s like another tax cut that will put more money in people’s pockets. We’re going to do this on our own. We don’t need congressional authorization to do it.”
Banks issuing loans to borrowers who could not afford them led to the housing crisis in 2008.
Asked if a lack of underwriting requirements for this refinance program could create similar problems, Piano, with the National Association of Mortgage Underwriters, said it was too early to know.
“There’s always a possibility that it could create problems. Lenders need to be always cautiously optimistic,” Piano said.
“It’s a little too new to know what the president’s plan is going to entail,” Piano said. “From an underwriter’s perspective, they’re kind of the last person in the process. They’re going to determine ultimately if the loan is going to get approved. As long as the underwriter is doing their job, that’s going to help in the process. But again, they’re following whatever regulations and requirements are already set forth. If requirements are low, one has to be reasonably cautiously optimistic that it doesn’t present problems in the future.”
The FHA fees will be cut to encourage more people to refinance while interests, now, are very low. The FHA currently charges an upfront mortgage insurance premium of 1 percent of the balance each year, which will be lowered to .01 percent, according to the White House. Further, there is an annual fee of 1.15 percent for each year of the refinancing, which will be cut to 0.55 percent.
HUD estimates the program will save the FHA-insured borrower about $3,000 per year -- ($1000 of which will come from the lower refinancing fees mentioned by President Obama) -- or $250 per month.
Blatant socialist wealth transfer.
Edited for accuracy.
And when this inevitably creates yet another crisis, they will again blame the “free market” and “predatory lending”, and insist that Fedzilla needs still more regulatory powers.
Oh, goodie! More ‘Ninja’ loans for the taxpayer to subsidize!
I'm in a business where I've had to follow the lending meltdown from the very start, and a lot of what you read about it inaccurate or just flat-out wrong.
Two things to keep in mind:
1) Around 70% of foreclosed loans were made by lenders that did not have to comply with CRA (Community Redevelopment Act) requirements.
This was no accident - the large "Countrywide" scale lenders were specifically created to avoid this and a lot of other state and Federal supervision - that's why they were able to write the sort of loans they often did.
And a *lot* of these loans were made to middle class and upper Income borrowers.
2) The lenders that had to comply with CDA were mostly community banks that underwrote loans much *more* carefully than the mega-lenders like Countrywide, and the result is that loans made by CDA compliant lenders actually have a substantially *lower* than average foreclosure rate.
The mortgage melt-down was a perfect storm of greed and self-interest that ran all the way from the street corner offices of the real estate agents, mortgage brokers and appraisers all the way to the corner offices at Countrywide and Fannie Mae and up and down both sides of the aisle in congress and at the regulators.
And if you think that all this happened just because the government forced banks to lend to brown people, you have been had by the very people who got rich running this scan, and you will likely be had again before this is over.
Educate yourself!
A good place to start is:
"All the Devils Are Here: The Hidden History of the Financial Crisis" by Bethany McLean.
B of A had no reason to help you. Why do you need a HARP loan? Any lender can get you 4.00 or better right now. I can....I own a mortgage company.
Not NINJA loans. In order to get a HARP, you must have a history of having been current on your mortgage. Obama the Liar left that little bit of info out of his press conference. Most people will not qualify, as they have had late payments, or even missed a payment along the way.
Well, that was pretty much my point as regards the current behavior of lendrs.
"Why do you need a HARP loan? Any lender can get you 4.00 or better right now. I can....I own a mortgage company".
It's a complicated piece of property: a SF home, an auxiliary building with both a home office and a rental unit, and a two unit apt. building all sitting on a single zoning lot with two different tax PINs, legal-conforming w/ the right to rebuild "in kind", on a lot zoned R2 in a dense urban are - HARP just happened to be the easy way to do it.
(I've refinanced this parcel conventionally in the past, and believe me: you DO NOT want to be the mortgage broker who has to shepherd this through the appraisal and underwriting process. It can be done - has been done several times - but it's a real PIAT.)
” (I’ve refinanced this parcel conventionally in the past, and believe me: you DO NOT want to be the mortgage broker who has to shepherd this through the appraisal and underwriting process. “
OK, you sold me! LOL!
What I read about this program when it was first announced is that there is a hidden 1.5% that is tacked on by the government, that goes to cover the extra risk and low or no qualifying. The 1.5% goes to the government to help pay for the bad Fannie and Freddie loans.
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