Comments on: “FHA Secure”: The Solution to Foreclosure? http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/ Home loans made easy Fri, 29 Aug 2008 04:26:06 +0000 http://wordpress.org/?v=2.3 By: LendingClarity.com » Blog Archive » FHA Secure, Alonso Quixano, and Windmills http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-13697 LendingClarity.com » Blog Archive » FHA Secure, Alonso Quixano, and Windmills Tue, 06 May 2008 04:39:21 +0000 http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-13697 [...] When FHA Secure was announced by the Bush Administration back in August of 2007, the FHA folks were perplexed. I know because I called them. First of all, FHA had already been doing unlimited CLTV refinances for a couple of years. Second, you didn’t have to be in default on your mortgage to qualify. And third, nobody had any idea what the hell the administration was talking about. Those familiar with the Cervantes classic Don Quixote will remember Alonso Quixano, the county gentleman who descends into fantasy and reconstructs a farcical reality in which he fights unwinnable battles with imaginary enemies. The familiar phrase “tilting at windmills” has become iconic for the persistent pursuit of futile endeavors. [...] […] When FHA Secure was announced by the Bush Administration back in August of 2007, the FHA folks were perplexed. I know because I called them. First of all, FHA had already been doing unlimited CLTV refinances for a couple of years. Second, you didn’t have to be in default on your mortgage to qualify. And third, nobody had any idea what the hell the administration was talking about. Those familiar with the Cervantes classic Don Quixote will remember Alonso Quixano, the county gentleman who descends into fantasy and reconstructs a farcical reality in which he fights unwinnable battles with imaginary enemies. The familiar phrase “tilting at windmills” has become iconic for the persistent pursuit of futile endeavors. […]

]]> By: Darin http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12913 Darin Wed, 19 Sep 2007 17:04:18 +0000 http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12913 I was on that conference call, and they indicated that the secondary financing may be provided by the existing lien holder or the proposed lender. (Dare I say that any available secondary financing would probably be acceptable to the program, should any lender agree to provide this financing.) HUD did indicate that they were looking into getting State, Local, and City government cooperation in providing this secondary financing, due to the fact that no lenders seemed to be participating or providing any piggyback products. They also indicated that they could not provide the name of any lender at this time who is participating in FHA Secure, although it was made available to all lenders as of Sept 4th. As they indicated, each lender will have to review the program, and determine whether (or not) they deem it something they want to participate in. I was on that conference call, and they indicated that the secondary financing may be provided by the existing lien holder or the proposed lender. (Dare I say that any available secondary financing would probably be acceptable to the program, should any lender agree to provide this financing.)

HUD did indicate that they were looking into getting State, Local, and City government cooperation in providing this secondary financing, due to the fact that no lenders seemed to be participating or providing any piggyback products.

They also indicated that they could not provide the name of any lender at this time who is participating in FHA Secure, although it was made available to all lenders as of Sept 4th. As they indicated, each lender will have to review the program, and determine whether (or not) they deem it something they want to participate in.

]]> By: Carl Pruitt http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12912 Carl Pruitt Wed, 19 Sep 2007 16:41:55 +0000 http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12912 At least since Oct. 2005, subordinate financing has been allowed on FHA refinances regardless of the combined loan to value - even on cash out refinances. As long as we are "leaving it in place", not creating a new lien. So it has only been effective for borrowers who already have 2nds. Not for lenders who are creating a new mortgage to cover the amount above the FHA limit. I've done several of them when refinancing FHA to FHA and Conv to FHA. The biggest problem is getting the lender who's going to be left in 2nd place to agree. Here is the quote from the mortgagee letter. "ML 2005-43: Revised Refinance Transactions (10/31/05) Subordinate financing may remain in place, but subordinate to the FHA insured first mortgage, regardless of the total indebtedness or combined loan-to-value ratio, provided the homeowner qualifies for making scheduled payments on all liens." HUD has already had conference call training giving the details and several lenders are already implementing the program At least since Oct. 2005, subordinate financing has been allowed on FHA refinances regardless of the combined loan to value - even on cash out refinances. As long as we are “leaving it in place”, not creating a new lien. So it has only been effective for borrowers who already have 2nds. Not for lenders who are creating a new mortgage to cover the amount above the FHA limit. I’ve done several of them when refinancing FHA to FHA and Conv to FHA. The biggest problem is getting the lender who’s going to be left in 2nd place to agree.

Here is the quote from the mortgagee letter.
“ML 2005-43: Revised Refinance Transactions (10/31/05)

Subordinate financing may remain in place, but subordinate to the FHA insured first mortgage, regardless of the total indebtedness or combined loan-to-value ratio, provided the homeowner qualifies for making scheduled payments on all liens.”

HUD has already had conference call training giving the details and several lenders are already implementing the program

]]> By: Marc Brinitzer http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12911 Marc Brinitzer Wed, 19 Sep 2007 16:14:31 +0000 http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12911 I think Darin has it correct. FHA is saying that the "lender" may execute a second, but which lender are they referring to? I doubt that the new FHA lender will be interested in issuing a new 2nd mortgage that exceeds 100% CLTV. It's far more likely that they are referring (if Bush even gets this) to the existing 2nd holder executing a new note or a resubordination to go back behind the new FHA 2nd. Carl is correct that FHA has previously allowed this practice, but only on FHA Streamline refinances. These are FHA to FHA rate and term refinances only and the borrower must have had a clean mortgage history on the FHA loan. What's in it for the existing 2nd holder? Ongoing payments, a "performing asset", and a chance that the home owner can stay in the home long enough for the market to come back. In a market like Sacramento where values have dropped precipitously, most 2nds (of the 80/20 variety) will be wiped out entirely. Better something than nothing. We'll see how this shakes out. The Bush proposal was a political move in my opinion. When I talk with lenders, they don't know the details and haven't decide which parts of this they will participate in. Most are saying it will be January '08 before they will know. I think Darin has it correct. FHA is saying that the “lender” may execute a second, but which lender are they referring to? I doubt that the new FHA lender will be interested in issuing a new 2nd mortgage that exceeds 100% CLTV.

It’s far more likely that they are referring (if Bush even gets this) to the existing 2nd holder executing a new note or a resubordination to go back behind the new FHA 2nd.

Carl is correct that FHA has previously allowed this practice, but only on FHA Streamline refinances. These are FHA to FHA rate and term refinances only and the borrower must have had a clean mortgage history on the FHA loan.

What’s in it for the existing 2nd holder? Ongoing payments, a “performing asset”, and a chance that the home owner can stay in the home long enough for the market to come back. In a market like Sacramento where values have dropped precipitously, most 2nds (of the 80/20 variety) will be wiped out entirely. Better something than nothing.

We’ll see how this shakes out. The Bush proposal was a political move in my opinion. When I talk with lenders, they don’t know the details and haven’t decide which parts of this they will participate in. Most are saying it will be January ‘08 before they will know.

]]> By: Carl Pruitt http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12875 Carl Pruitt Sun, 16 Sep 2007 16:15:44 +0000 http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12875 Of course it has been allowable for quite some time under the standard FHA guidelines to have a second mortgage resubordinate even if the second mortgage is above 100% of the value. This has been valuable when the borrower has two mortgages, however there has been a decided and foolhardy lack of cooperation evidenced by the second mortgage holders. They often refuse to resubordinate with the result being a default on both mortgages. The second mortgage holder definitely ends up on the short end of the stick then. With FHASecure, I bet you will have bigger lenders who also do FHA lending refinance their own subprime loans and hold back seconds for the balance. If only to avoid a default on their own books. However, there are a lot of subprime note holders who do not do FHA loans or are even out of business. It will be really interesting to see how these lenders interact with other lenders and brokers trying to refinance these loans. Of course it has been allowable for quite some time under the standard FHA guidelines to have a second mortgage resubordinate even if the second mortgage is above 100% of the value. This has been valuable when the borrower has two mortgages, however there has been a decided and foolhardy lack of cooperation evidenced by the second mortgage holders. They often refuse to resubordinate with the result being a default on both mortgages. The second mortgage holder definitely ends up on the short end of the stick then. With FHASecure, I bet you will have bigger lenders who also do FHA lending refinance their own subprime loans and hold back seconds for the balance. If only to avoid a default on their own books. However, there are a lot of subprime note holders who do not do FHA loans or are even out of business. It will be really interesting to see how these lenders interact with other lenders and brokers trying to refinance these loans.

]]> By: Scott Burton http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12790 Scott Burton Fri, 07 Sep 2007 23:53:43 +0000 http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12790 Interesting, especially item #3. I think the ones that need the most help will be those that are in a neg equity situation. I wonder what the chances are that the existing lender will execute a 2nd, in this market. Just the knowledge of the existence of the program might be of some benefit to the markets. I truly hope it helps some folks, even if just a few. Interesting, especially item #3. I think the ones that need the most help will be those that are in a neg equity situation. I wonder what the chances are that the existing lender will execute a 2nd, in this market. Just the knowledge of the existence of the program might be of some benefit to the markets.

I truly hope it helps some folks, even if just a few.

]]> By: Marc http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12765 Marc Thu, 06 Sep 2007 02:26:42 +0000 http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12765 Darin, thanks for that clarification. And it is the existing lender, as I understand it, who may execute that 2nd for the shortfall and continue to carry that note. Darin, thanks for that clarification. And it is the existing lender, as I understand it, who may execute that 2nd for the shortfall and continue to carry that note.

]]> By: Darin http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12762 Darin Wed, 05 Sep 2007 16:30:37 +0000 http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12762 I found this... "If the new maximum FHA loan is not enough to pay off the existing first lien, closing costs and arrearages, the lender may execute a second lien at closing to pay the difference. The combined amount of the FHASecure first mortgage and any subordinate lien may exceed the applicable FHA loan to value ratio and geographical maximum mortgage amount." I found this…

“If the new maximum FHA loan is not enough to pay off the existing first lien, closing costs and arrearages, the lender may execute a second lien at closing to pay the difference. The combined amount of the FHASecure first mortgage and any subordinate lien may exceed the applicable FHA loan to value ratio and geographical maximum mortgage amount.”

]]> By: Darin http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12761 Darin Wed, 05 Sep 2007 16:14:06 +0000 http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12761 Here's a link to the HUD Mortgagee letter: http://www.hudclips.org/sub_nonhud/html/nph-brs.cgi?d=MLET&s1=07-$[no]&op1=AND&SECT1=TXTHLB&SECT5=MLET&u=../html/shortcut.htm&p=1&r=1&f=G Here’s a link to the HUD Mortgagee letter:

http://www.hudclips.org/sub_nonhud/html/nph-brs.cgi?d=MLET&s1=07-$[no]&op1=AND&SECT1=TXTHLB&SECT5=MLET&u=../html/shortcut.htm&p=1&r=1&f=G

]]> By: Darin http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12760 Darin Wed, 05 Sep 2007 16:12:47 +0000 http://www.lendingclarity.com/2007/08/31/fhasecure-the-solution-to-foreclosure/#comment-12760 Here's a link to HUD's new Mortgagee Letter (issued yesterday, as indicated in the initial memo): http://www.hudclips.org/sub_nonhud/html/nph-brs.cgi?d=MLET&s1=07-$[no]&op1=AND&SECT1=TXTHLB&SECT5=MLET&u=../html/shortcut.htm&p=1&r=1&f=G I haven't had a chance to read through it yet. Here’s a link to HUD’s new Mortgagee Letter (issued yesterday, as indicated in the initial memo):

http://www.hudclips.org/sub_nonhud/html/nph-brs.cgi?d=MLET&s1=07-$[no]&op1=AND&SECT1=TXTHLB&SECT5=MLET&u=../html/shortcut.htm&p=1&r=1&f=G

I haven’t had a chance to read through it yet.

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