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.
