Interest Rate Roundup

Thursday, December 20, 2007

CNBC raises an important question -- is FHASecure a flop?

Since the FHASecure loan program was announced this summer, the open question has always been "How many people will this refinance-bailout thing really help?" Here is what it says at the website:

"In only the first 4 months of FHASecure, more than 40,000 households have refinanced under the new housing insurance program to protect their families' investment in the American Dream. Announced by President Bush on August 31, 2007, along with HUD Secretary Jackson and Treasury Secretary Paulson, FHASecure is already helping thousands of American families, faced with the possibility of foreclosure because of rising interest rates, to keep their homes.

"More good news is that an additional 20,000 are in the pipeline and their approval is expected by the end of December. That will mean that in the first 4 months of the program, FHASecure will have helped 53,000 families and received more than 127,000 refinance applications from families whose loans are current or past due."

But CNBC has an interesting news item/posting up at their website today asking a simple question: "FHA Secure: Wait, How Do 600 Applications Become 35,000?" The gist of the item -- that HUD decided to lump ALL FHA loan applications and loan fundings that have been done since August into the tally that was supposedly FHASecure loans. Here's an excerpt from CNBC:

"Here’s the truth: FHA Secure has received about 3,000 applications from homeowners who are delinquent on their loans and has closed on about 600 since September, that answer from an official HUD staffer who gave me the actual numbers after more than one request.

"Wait, how is 600 translated into 35,000??? I know the President is prone to grammatical errors, but not usually numerical ones. (I’ll also add that another reporter was given the number 266, reportedly by HUD as well).

"It seems that at some point this fall, the folks at HUD or FHA or somewhere decided to pool all loans made by the FHA under the “FHA Secure” umbrella. A rose, by any other name. So yes, since September, the FHA has backed 35,000 loans, the vast majority of which were in no danger of default, but were just normal loans, and that’s pretty close to a normal three-month period.

"As for the 300,000 families Mr. Bush said would be helped next year, well only about 60,000 of them would end up as borrowers who are in trouble on their loans. That’s still a lot, but I just want to set the record straight."

Holy cow. Have we all been snowed about the impact FHASecure might have? By the way, if you're wondering what is going on in terms of TOTAL FHA volume, the origination statistics can be found on page 20 of this mega-PDF document. You'll see refinance volume was running at about 72,000 1-4 family loans in Q3. And if you look at the monthly data, you can clearly see that FHA application volume has been increasing in 2007 due to the obliteration of the private subprime/Alt-A lending market.


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