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07 Aug 09 FHA Having Trouble Insuring Reverse Mortgages

The increase in FHA funding authority means the government is following the marketplace. FHA mortgages now represent some 35% of all new financing, up from about 5% just a few years ago when the program was crowded out of the marketplace by bad credit loans. It would be counterproductive to restrict the program when FHA loans enjoy great public confidence, especially FHA loans for borrowers with poor credit. In this economy we need home buyers, reason enough to encourage people to enter the marketplace.

Reverse Mortgages: what HUD calls home equity conversion mortgages (HECMs) — those reverse mortgage loans remain attractive for many senior borrowers, but have become troublesome for HUD to insure because of falling home values. While HUD asked Congress for $800 million to subsidize the reverse mortgage program this year, Congress in this bill is saying forget it. Instead of more money, the bill requires HUD “to ensure that the program operates at a net zero subsidy rate.” Given that reverse mortgage are amazingly risky to insure in a slow market what can HUD do to meet the net zero requirement? It can cut back on the number of reverse mortgages it’s willing to insure, it can reduce the maximum amount it will cover, or both. The bottom line: If you want an FHA-insured reverse home loan it might be best to get one before October 1st, the start of the new fiscal year.  Read the rest of the article at FHA Loan Pros.

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06 Dec 08 Is Our Government Buying Bad Mortgage Loans?

The Fed agreed to purchase $100 billion in direct obligations from mortgage giants Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks. It also will purchase another $500 billion in mortgage-backed securities, pools of home mortgages that are bundled together and sold to investors.  The Fed chairman Sheila Bair continues to encourage mortgage lenders to be more pro-active with affordable home loan modifications to maintain liquidity and promote more foreclosure prevention programs. 

Treasury Secretary Henry Paulson had said recently that the government was working on the new program, which will be supported by $20 billion of credit protection provided by the $700 billion bailout fund.Check back for the latest Mortgage News. Read the complete article > Will the Fed Buying Bad Credit Home Loans Help Housing and Credit Markets Recover?

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