Government Refinance Assistance

We get this recent press release from Bank of America:

CHARLOTTE, N.C., Nov. 28 /PRNewswire/ — Bank of America today announced that it will create a second fulfillment center for government loan processing in Dallas, providing jobs to about 150 associates formerly supporting the bank’s wholesale fulfillment operations, which the bank announced last month it was closing effective Jan. 1.

(Logo: http://www.newscom.com/cgi-bin/prnh/20050720/CLW086LOGO-b )

“We will leverage the knowledge and skill of our Dallas-based wholesale associates to help the bank manage the strong growth in demand for our FHA and VA loan products,” said Bob Griffith, Bank of America Mortgage Fulfillment executive. “Texas is our strongest market for government loan programs, and we are thrilled to have the opportunity to grow our business there.”

Bank of America opened its first government lending fulfillment operations center in Jacksonville, FL, in June 2006. That facility employs about 300associates in its specialized government lending operations. Bank of America’s production volume for FHA and VA loans is expected to be nearly $2 billion in2007, more than double the volume from 2006.

“The dislocation in the subprime market has sparked renewed enthusiasm for FHA & VA loan products across the nation,” said Allen Jones, Bank of America’s Government Lending executive. “Government loan programs provide many borrowers with benefits over other programs since the loans are insured by FHA or guaranteed by the VA.”

Bank of America’s volume of government business has grown significantly in2007 following a renewed emphasis in Bank of America’s retail loan channels.Applications for government loan programs have increased to about 18 percentof total volume in the retail sales channel, up from the low single digits in2006.

“More than 80 percent of government loans are provided to first-time homebuyers,” Jones said. “With recent successful efforts to simplify thegovernment loan process, we expect continued growth as more home buyers recognize the value and security of FHA & VA loans.”

Bank of America’s retail channel includes 10,000 personal bankers in nearly 6,000 banking centers; 2,200 mortgage loan officers serving 33 states and the District of Columbia, a phone channel known as LoanLine, and the popular financial services website, http://www.bankofamerica.com.

Lawrence Yun, chief economist with the National Association of Realtors was quoted recently as saying:

“A trend away from subprime mortgages to FHA loans, which often carry much lower interest rates, is a positive development for consumers and the housing market going forward. Still, it will take some time for the change to yield a measurably higher closed sales volume in the aftermath of the subprime collapse. In the near term, we expect home sales to remain fairly stable.”

Diana Olick over at CNBC made some interesting comments on the impact foreclosures have on local governments and local economies. Here is an excerpt:

Today in Detroit, the U.S. Conference of Mayors is holding a meeting to talk about a new report showing the impact of foreclosures on local cities. The numbers are staggering: billions of dollars in losses from weak residential investment, lower spending and income in the construction industries and curtailed consumer spending due to decreased home equity.

New York State alone is projected to lose $10 billion in 2008 economic output as a result of the mortgage crisis. The report gives all kinds of scary numbers, giving the impression that the foreclosure crisis, whether it’s in your backyard or not, will affect everything in your city from potholes to pencils in school, thanks to all the money lost.

The trouble is, the mayors don’t offer too many suggestions to fix it, other than the usual working with community groups, more communications with lenders, ad campaigns and the ever-popular “reform the FHA.”

Kenneth Harvey over at the Washington Post recently wrote about the FHA reform bill that is stalling in the US senate. Here is an excerpt:

Thousands of Americans may be losing their homes to foreclosure or facing hefty mortgage-payment resets, but the Senate appears to be in no rush to help.

The House has passed several major housing-relief measures in recent weeks, but the Senate hasn’t passed even one. On the eve of its two-week Thanksgiving recess, the House approved by a bipartisan vote the most sweeping reforms of the national mortgage system in more than two decades. Meanwhile, the Senate stalled legislation that would strengthen the Federal Housing Administration’s mortgage programs, a key resource for homeowners who need to refinance out of adjustable-rate loans into more affordable fixed-rate ones.

The FHA reform bill passed the House in September and had been approved by the Senate Banking Committee by a 20-1 vote. But it was blocked from floor action by a small group of Republicans who are unsympathetic to federal involvement in the mortgage market, even if it’s designed to assist subprime borrowers.

The FHA bill is particularly important for high-cost housing markets — California and parts of the East Coast in particular — because it raises the maximum mortgage amounts the agency can insure. It also would cut minimum down payments and allow the FHA to charge lower premiums to applicants with better credit histories and higher premiums to borrowers with less-favorable credit.

The bill was blocked from a floor vote on Nov. 15 by Sens. Tom Coburn (R-Okla.) and Jim DeMint (R-S.C.) after a hold by Elizabeth Dole (R-N.C.). Dole objects to the FHA’s plan to begin pricing mortgages based on credit risk starting in January, whether the reform bill is approved or not. Dole is an ally of the private mortgage insurance industry, which would have to compete with a revived FHA in the low-down-payment segment of the mortgage market.

Read the whole article here.

Steve Brown over at the Dallas Morning News recently had this to say about the FHA reforms that are in the works:

LAS VEGAS – The top officers at two of the country’s mortgage giants said Tuesday that they are taking steps to deal with the mortgage crunch and rising foreclosure rates.

But they acknowledged that they are challenged to make quick, meaningful changes.

Daniel Mudd, chief executive at Fannie Mae, the biggest source of money for U.S. home loans, outlined steps his firm has taken to help homeowners faced with foreclosure.

Too little

“They are clearly not enough in the face of this downturn, the most serious disruption in the housing and mortgage markets in decades,” Mr. Mudd told real estate agents from around the country meeting Tuesday at the National Association of Realtors’ annual convention.

Mr. Mudd said Fannie Mae is renegotiating problem loans – most of them subprime mortgages – at a rate of about 750 a week.

“We are working our way though this problem,” he said.

By many estimates, almost 2 million American homeowners will lose their houses to foreclosure during the next two years because of subprime mortgages that increase their monthly payments.

‘Slow-moving tragedy’

“We’re all seeing – from families to neighborhoods to cities to the country at large – a pretty slow-moving tragedy playing itself out,” Mr. Mudd said.

“An unnecessarily prolonged housing correction, highlighted by the level of foreclosures we are all seeing, hurts everyone,” he said.

Adding to the problem, Fannie Mae economists predict that nationwide average home prices will fall throughout 2008.

“It may be a couple of years before a more customary 4 or 5 percent growth rate returns to the market,” Mr. Mudd said.

Fannie Mae is pushing federal regulators and lawmakers to allow it to provide funding for more and higher price loans to help overcome the credit crunch.

The Federal Housing Administration, which provides government-backed insurance for home loans, is also seeking federal approval to modernize and provide more financing.

Hindsight

FHA Commissioner Brian Montgomery told Realtors that if the expansions at the FHA had been taken earlier, some of the current mortgage problems would have been avoided.

“The time to move on this was last year,” he said.

He called for Congress to approve changes at the FHA.

“We have the products and the services necessary to assist hundreds of thousands of moderate-income homebuyers,” Mr. Montgomery said.

“All we need now is the legislation to put these improvements into practice,” he said.

He said the FHA has already expanded its refinance business to provide mortgages for borrowers in trouble with subprime loans.

“We project that we will serve approximately 80,000 delinquent borrowers this year,” Mr. Montgomery said.

Kenneth Hardy reported the following rather disappointing news as published over in the San Jose Mercury News:

WASHINGTON - Thousands of Americans may be losing their homes to foreclosure or facing hefty mortgage-payment resets, but Congress appears to be in no rush to offer help.

While the House has passed several major housing-relief measures in recent weeks, the Senate hasn’t managed to pass even one. On the eve of the two-week Thanksgiving recess, the House approved by a bipartisan vote the most sweeping reforms of the national mortgage system in more than two decades.

Meanwhile, the Senate stalled legislation that would strengthen the Federal Housing Administration’s mortgage programs - a key resource for consumers who need to refinance out of adjustable-rate loans with rapidly escalating monthly payments into affordable fixed-rate mortgages.

The FHA reform bill passed the House in September and had been approved by the Senate Banking Committee by a 20-1 vote. But it was blocked from floor action by a small group of Republicans who are not sympathetic to vigorous federal involvement in the mortgage market, even if it’s designed to assist borrowers ravaged by private-sector subprime lenders.

The FHA bill is particularly important for high-cost housing markets around the country - California and parts of the East Coast in particular - because it raises the maximum mortgage amounts the agency can insure. It also would cut minimum down payments, and allow FHA to charge lower premiums to applicants with better credit histories and higher premiums to borrowers with less-favorable credit backgrounds.

The bill was blocked from a floor vote Nov. 15 by Sens. Tom Coburn, R-Okla., and Jim DeMint, R-S.C., following a hold placed on it by Elizabeth Dole, R-N.C. Dole objects to FHA’s plan to begin pricing mortgages based on credit risk starting next January, whether the reform bill is approved or not. Dole is an ally of the private mortgage insurance industry, which would have to compete with a revived FHA in the low-down-payment segment of the mortgage market.

Coburn and DeMint argued that the FHA reform proposal was too far-reaching to be rushed through the Senate before the Thanksgiving break without a potentially lengthy floor debate.

The House-passed mortgage reform bill may well face a similar uncertain fate in the Senate. Among other provisions, it would:

• Require every loan originator in the country - whether a mortgage broker or a bank employee - to be registered and licensed in a national database, and meet minimum educational and certification standards.

• Require all originators to make only loans whose terms are “appropriate” to the borrower. For example, the borrower must have a “reasonable” ability to repay the mortgage and must receive a “net tangible benefit” from the loan in the case of a refinancing.

• Ban and punish lenders who “steer” borrowers into higher-cost mortgages than their credit histories merit. This problem has been prevalent in home loans made to first-time and minority applicants who often have minimal or “thin” national credit bureau files but solid payment histories on rents, utility bills and other forms of credit that are not reported to the bureaus. Some loan officers also steer minority applicants into inappropriately higher-cost mortgages solely to reap higher fees, according to consumer advocates.

• Extend legal liability for toxic and predatory loans to Wall Street firms that securitize pools of mortgages into bonds. Under current rules, those companies are often insulated from lawsuits over predatory loans, even though they may have been aware - or should have suspected - that borrowers had been abused.

• Clean up the appraisal field by prohibiting and punishing interference in valuations, especially brokers and lenders pressuring appraisers to “hit the number” needed to allow loans to close.

Banking and mortgage lobbyists sought unsuccessfully to remove or soften some of the bill’s reforms before the House vote, but are in a position to block the legislation outright in the Senate. Banking Committee Chairman Chris Dodd, D-Conn., who is campaigning for his party’s presidential nomination, had promised his own mortgage reform bill to focus support in the Senate, but to date has introduced nothing.

Ironically, the majority of members in both the House and the Senate would probably agree - if polled - that the American mortgage system broke down between 2001 and 2005, allowing lax underwriting, bogus appraisals and fraud to trigger billions of dollars of losses and hundreds of thousands of foreclosures.

But when the questions turn to how do we fix the system and how fast, the final answers now appear to rest with the Senate, where the clear message on housing problems so far this session has been: Hey, what’s the rush?

Here is an excerpt of a recent article in the Cape May County Herald:

Yun also noted that while the credit crunch slowed deals in 2007, much of the pain is being felt in the subprime area, while other mortgage sectors are stabilizing.

Subprime constitutes only about 10 percent of mortgage loans, but accounts for some 40 percent of current foreclosures. Going forward, proposed federal legislation that would increase FHA loan limits should help moderate-income buyers, said Yun.

Yun expects GDP growth of 2.8 percent and job growth of 1.1 percent in 2008. Inflation should also remain under 3 percent, and interest rates should rise only slightly, he predicts. “For buyers who are into home ownership for the long term, housing still remains the best investment,” he concluded.

Other national sales downturns in the last 30 years were spurred by broad economic problems, Yun said. This year, by contrast, economic fundamentals remain solid, with the U.S. gross domestic product expected to grow by a respectable 2 percent, supported by 2 million job gains in the last two years and continuing low interest rates.

Yun said 2007 existing-home sales will exceed 5.5 million, close to the level in 2002, a record-setting year. At the same time, home prices remain near record highs despite drops in a few markets.

Jesse Jackson called for more government mortgage assistance in a recent article in the Chicago Sun Times. Here is some of the article:

It is time to act. Join us on Dec. 10 on Wall Street and in cities across the country. Stand up to stop the wave of home loan defaults that threatens to foreclose not just on people’s homes but on our hopes.

The problem keeps getting worse. Two million homeowners face foreclosure over the next year. Their neighbors will lose billions of the equity they have in their homes. Millions will find themselves stuck, unable to get a decent price for their homes in a flooded market. Tens of millions more will tighten their belts. Communities, from Cleveland to Las Vegas to much of Florida and beyond, will struggle with budget crises.

This is a recipe for recession. Fed Chairman Ben S. Bernanke told Congress he expects slowing growth and rising unemployment. How could he not? The financial sector, which generates nearly one-third of all corporate earnings, has written off about $40 billion in troubled loans this year, with more to come. Gas prices are hitting $100 a barrel, even as we head into the cold winter months. Food prices are rising. Americans, already burdened with stagnant incomes, now are piling up credit card debt just to make ends meet. We’re headed into rough waters.

But so far there has been no action on any program of any scale to keep people from losing their homes, fouling their neighborhoods and driving cities and schools into budget crises and the nation into recession.

The investment houses and banks already have been helped. The Federal Reserve lowered interest rates; the Treasury pushed to set up a $70 billion fund to help Citibank and others manage the losses. They didn’t sort out the worthy from the irresponsible. The Treasury didn’t suggest risk counseling for the financial houses that lost billions.

But for homeowners, the Federal Reserve and the Treasury call for case-by-case solutions, for strapped homeowners to get individual counseling, even when they know this can’t meet the crisis. In Congress, Rep. Barney Frank has pushed for action. But Republicans are opposed, and Senate Democrats seem increasingly to cater to the fortunes of Wall Street rather than Main Street. With the exception of John Edwards, the presidential candidates and their economic advisers address the issue as if it were someone else’s problem.

This makes no sense. Many homeowners now facing foreclosure were steered into subprime mortgages, often laced with hidden fees that they never knew about. Single women, young couples, Latinos and African Americans were particular targets of aggressive mortgage brokers. The brokers didn’t care if the loan made sense because they sold it off immediately to the financial houses. And they had a big incentive to hide the fees and interest rate jumps because those made the loans worth more when sold. Now new homeowners who have kept up their payments are facing foreclosure.

Citibank warns that it is too big to fail, that the Treasury must act to bail out the banks. But 2 million homeowners are too many to fail; they will take down our economy if they do.

So it is time to challenge the timidity and the cribbed imaginations in Washington and to demand action before the crisis brings down the entire economy. We need action to postpone all resets for those who have maintained their payments. We need Fannie Mae or the FHA to step up to require renegotiations before foreclosures. It is time to support homeowners, not just speculators.

An article on avoiding foreclosure appeared recently at the KSLA web site in Shreveport. It wisely mentions government backed FHA programs:

An estimated two million Americans could default on loans over the next two years as their loans reset to a much higher rate, according to the U.S. government. With thousands of Ark-La-Tex residents in an ‘adjustable rate mortgage,’ also called an ‘a.r.m.,’ there are steps they can take before their payment adjusts and becomes unpayable.
Officials with the Bush Administration say they’re aggressively dealing with rising numbers of mortgage foreclosures. In front of a congressional committee, officials from the Departments of Treasury as well as Housing and Urban Development said they’re working with an industry group called “Hope Now,” to deal with the crisis.
Under Secretary of Treasury Robert Steel told the committee, “it’s clear to all, that the earlier we identify struggling borrowers the more likely it is that services and lenders will be able to refinance or modify their mortgages into something more sustainable for the long term. If we wait until borrowers miss several payments, their credit profiles will be tarnished and they will have far fewer refinancing options.”
Steel also told federal lawmakers that lenders need to offer clear and understandable information on the mortgage products they sell. But he also said home buyers have a responsibility to use that information and understand their mortgages.
Many people in ‘Adjustable Rate Mortgages,’ a.r.m.’s, are told that within those 2, 3, 5 or even 7-years is a great time to improve their credit to refinance. But when that doesn’t happen some homeowners get in big trouble.
It’s a homeowner’s nightmare: Your home going on the auction block. That imagery combined with our report Thursday on how the local housing market is bucking the national downturn, prompted KSLA News 12 viewer Earl Ford to call us. Ford recalled, “I was thinking about you know I could be in that same predicament, you know. I thought about my family, chance of losing our home.”
Shannon Donaldson told KSLA News 12, “if you’re on an adjustable rate mortgage and let’s just say you know that it’s going to adjust in December or, you know, January, start right now.”
Donaldson owns CastleRock Mortgage Group of Louisiana and told us what her first step for her client would be: Pull up their credit report to see where they may need to improve their the score if it’s not high enough to refinance.
She estimated that scenario applies to 1-in-3 people with an a.r.m. Some lenders are working with clients without the cost of re-financing, added Donaldson. “And the lender set them on a fixed-rate mortgage.” But that’s no guarantee, especially with a low credit score.
Donaldson pointed to a new F.H.A. program that can also help those facing a new, much higher monthly payment after adjustment, “as long as you were current until your payment adjusted, that they will re-finance those customers.” said Donaldson.
The Ford family’s second a.r.m. in seven years ‘adjusts’ in January. So what then? Earl Ford’s wife Kellye intimated, “I don’t know. He usually works the deals and I usually pay the bills. (laugh). So, I don’t know.”
For those who wait until the foreclosure notice arrives, a year ago some lenders would buy you out. But, that option is no longer available. Even bankruptcy is not a sure thing for keeping your home because of tougher restrictions.

Jessica Anderson of Kiplinger recently wrote an article on how loans are still out there to be found via the FHA and VA programs. Here is an excerpt:

Richard Khoe used to wonder how he could ever afford to buy a home of his own. Coming up with a down payment in the ever-escalating Washington, D.C., market seemed like a pipe dream.

But last February, after years of living in a studio apartment, the 36-year-old public-policy researcher finally saved enough to buy a three-bedroom rowhouse in D.C.’s gentrifying Columbia Heights neighborhood. He had 5% of the purchase price, and his parents kicked in an equal amount so he could make a 10% down payment.

Timing was key for Khoe. The seller had reduced the price from $560,000 to $460,000 as the market dipped. And because the owner hadn’t updated the appliances — or the flowered wallpaper in the bathroom — she accepted an offer of $426,000, with a $5,000 credit for repairs. “Everything was old, but it was in good condition,” says Khoe. “So I didn’t have to spend more money right away to make the place livable.”

The new deal

The housing boom made it easier for all buyers to qualify for a mortgage. In fact, over the past five years, four in ten buyers were first-timers, with a median age of 32. But now there are fewer sources of credit, so lenders are tightening up.

For example, borrowers applying for an adjustable-rate mortgage will have to qualify for the fully indexed interest rate, not the initial teaser rate. And 100% financing deals are drying up. “The whole market is in a panic right now,” says Jim McMillan, a senior loan officer with JP Mortgage/JPMorgan Chase. Until the subprime mess gets sorted out, he says, larger institutions are staying away from any loan except 30-year fixed-rate mortgages with 20% down.

First-timers with credit dings are among the hardest hit. One alternative for them is a program that fell into disuse in the easy-credit days: the Federal Housing Administration loan. You apply for the loan at a private lender, but the FHA insures the loan against default. You generally pay a 3% down payment-money that can come from a gift-plus mortgage insurance premiums. Veterans who want to put zero down can turn to VA loans.

A recent article by Les Christie at CNNMoney.com publishes comments by readers none too happy about the help the U.S. government is offering homeowners. Here is an excerpt:

NEW YORK (CNNMoney.com) — Not everyone is happy about mortgage lenders’ latest efforts to help troubled borrowers.

Take Teresa Nelson. Instead of going for an adjustable rate mortgage with its lure of low initial rates, she opted for the security of a 30-year fixed at 7.10 percent for a house she bought in Pinellas Park, Fla. in December, 2005.
Special Reportfull coverage
Mortgage Meltdown

* Mortgage reform bill picks up key backing
* Subprime bailouts: Chump check
* Foreclosures: Moving on up
* Real estate commissions rise

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“I was well aware of what an ARM meant, and was staying far away from those snake-oil pipe-dream promises,” Nelson said. “I also wasn’t shopping for a short-term, big payoff investment - I was looking for my home, until I retire.”

But many delinquent subprime borrowers who went for low teaser rates that shot up to unaffordable levels are now paying lower rates than Nelson as part of a new round of foreclosure prevention packages. And she doesn’t like it.

For example, one subprime borrower had a riskier hybrid adjustable rate mortgage (ARM) with a rate of just under 7 percent that was going to reset in December to 10.5 percent. But last month, as part of a new bailout plan from Countrywide Financial, the lender gave him a rate reduction to 5 percent on his loan, saving him hundreds of dollars a month.

Nelson feels cheated and has little sympathy for people who she believes weren’t as careful as she was. “Everybody was seeing dollar signs,” she said, “and let their greed get the better of them. So, no. No bail-out, no assistance with my tax dollars. Not one red cent.”

She’s not alone. Last month, many CNNMoney.com readers expressed outrage to bailouts - whether they involved tax dollars or not - after Countrywide announced good deals for bad loans.

Read the whole article here.

Robert Schroeder, a reporter for MarketWatch in Washington, filed this interesting assessment of the remarks U.S. Treasury undersecretary Robert Steel made for congress on Friday:

WASHINGTON (MarketWatch) — A top U.S. Treasury official asked for congressional help Friday in reaching out to borrowers with risky mortgages.

Robert Steel, undersecretary for domestic finance, said in prepared remarks to a House Financial Services Committee hearing that a direct-mail campaign to at-risk borrowers is starting up Nov. 19.

Steel told lawmakers that a group called “Hope Now” — composed of mortgage servicers, lenders and counselors — is reaching out to borrowers to educate them about refinancing options.

“When you are home in your districts over the weekend or for the holidays, please tell your constituents about this mail campaign,” Steel said. “Tell them it is OK to contact Hope Now for assistance.”

More than two million subprime mortgages are expected to reset to higher interest rates in the next 18 months.

The Bush administration, lawmakers and private industry have been scrambling to address the woes in the mortgage market, with the bulk of efforts going into fixes for the subprime market, which serves borrowers with poor credit.

A top Housing and Urban Development official said Friday it’s partly up to borrowers to talk to their lenders to work out troublesome loans.

“If the industry works together, it is possible to reinstate or refinance many of these loans, but only if borrowers respond to offers of assistance,” said Brian Montgomery, assistant secretary of housing.

Citing industry sources, Montgomery said that more than 40% of delinquent borrowers don’t respond to contact from their lenders until it’s too late.

But both the Bush administration and Democrats say they’re not in favor of bailouts.

“We are not talking about any kind of bailout in the sense of public money,” said Rep. Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee. “We are mitigating pain, we hope,” by offering proposals to help troubled borrowers.

Rep. Al Green, D-Texas, said lawmakers want to help those facing foreclosure but don’t want to interfere in the markets.
“We want to let the market do what the market does,” said Green.

No Republicans were in attendance at the Friday morning hearing. Friday hearings are rare since members usually return to their districts for the weekend.

Bill Longbrake, a Washington Mutual executive working on the Hope Now alliance, said the group is sending out 200,000 letters to at-risk homeowners beginning Nov. 19.

“We want to show people that help is available,” Longbrake said in a statement. “If you receive a letter, we strongly encourage you to call your mortgage company for help.”

Neil Roland for Bloomberg recently reported that plans to cease a down payment assistance program have been blocked in federal court for now. Here is the full story are reported in the Charlotte Observer:

A federal court temporarily stopped the government from canceling a down-payment assistance program used by hundreds of thousands of low- and middle-income homebuyers.

The U.S. Department of Housing and Urban Development was set to end the decade-old program, saying it leads to higher prices and a disproportionate number of foreclosures. The program lets nonprofit organizations including AmeriDream Inc. and Nehemiah Corp. of America fund down payments and be reimbursed by the sellers of the homes.

“HUD failed to supply a reasoned analysis for its departure from its longstanding policy,” the U.S. District Court for the District of Columbia said Wednesday in ordering a preliminary injunction. The agency also “failed to consider reasonable proposed alternatives,” the court said.

Federal law forbids sellers from paying down payments for buyers who secure loans through the Federal Housing Administration. Down payments show that borrowers have savings. They also give buyers equity or a stake in the house.

For years, however, sellers have been able to get around the law by forwarding down-payment money through special nonprofits such as AmeriDream.

The Observer has found a high rate of foreclosure in FHA-backed loans in the Charlotte area, especially when those loans involved an arranged gift from a charity to cover a borrower’s down payment. The Observer reported in September that FHA loans accounted for almost a quarter of recent foreclosures in Mecklenburg County.

AmeriDream, based in Gaithersburg, Md., and other nonprofit organizations are seeking a permanent injunction to HUD’s rule banning seller-paid down-payment assistance. The court ordered these proceedings to continue.

“We intend to abide by the court’s decision,” HUD spokesman Stephen O’Halloran said in a statement. He declined to say whether the government would appeal.

HUD’s decision to cancel the program, ordered Oct. 1, was to take effect Wednesday. The program was used by more than 100,000 consumers last year and accounted for a third of FHA-insured loans.

White House representatives address congress about the rising foreclosures and mortgage difficulties in the US. Martin Crutsinger of the AP wrote this about it:

WASHINGTON (AP) — The Bush administration assured Congress on Friday that it is aggressively working to deal with a rising tide of mortgage foreclosures in the country.

Officials, however, said homeowners threatened with the loss of their homes must do their part by actively seeking help to avert foreclosures.

Robert K. Steel, Treasury’s undersecretary for domestic finance, and Brian D. Montgomery, an assistant secretary at the Department of Housing and Urban Development, said the administration has a comprehensive plan and is working with an industry group formed to deal with the looming foreclosure crisis.

Many Democrats have been highly critical of the administration’s efforts, contending that they are too dependent on the industry and offer too little in terms of government assistance to stem what could be an estimated 2 million home foreclosures in the coming two years.

But Steel argued that the administration is working through a new initiative at the Federal Housing Administration to offer FHA-insured loans to borrowers in danger of default and also through HOPE NOW, an industry alliance.

“Under the president’s leadership, the administration is working diligently to help mitigate the impact of rising foreclosures on homeowners and the economy,” Steel said in his prepared testimony.

Montgomery told the committee that the FHA program is available for homeowners to help them “weather personal financial crises and reinstate delinquent loans.”

While the government reported Wednesday that the overall economy surged ahead at an annual rate of 3.9 percent in the July-September quarter, economists believe that the steepest downturn in housing in more than two decades, which has Wall Street worried because of lingering credit problems, will cut economic growth by half in the current quarter, raising concerns about a possible recession.

Estimates are that mortgage defaults could rise to 2 million or more in the coming two years in the subprime mortgage market, loans provided to borrowers with weak credit histories. Those loans are now resetting from low introductory rates to much higher rates which can add as much as $250 to $300 to the typical monthly mortgage payment.