About Government Refinance and Home Purchase Programs

Information and Updates on Government Mortgage Programs
Filed under Government Mortgage Financing Programs News

There was an interesting article in Forbes.com recently on how FHA and private banks work together. Here is an excerpt:

Washington, D.C. –

If Congress gets its way, the Federal Housing Administration’s mission will be greatly expanded, allowing it to insure as much as $300 billion in additional mortgages to help struggling homeowners refinance.

That raises a few important questions: How good is the FHA at keeping borrowers out of foreclosure? How will it handle the heavy load of insured loans that do go bad?

Answering the first question is surprisingly tough, say housing finance experts. That’s because less than three years ago, the FHA issued new rules designed to keep homeowners out of foreclosure. It’s too soon to tell how they’ve worked.

The new rules provide for lenders to lose three times the amount of any FHA mortgage insurance benefit they claim unless they first try to work things out with borrowers in default, by, for example, modifying loan terms. The results of this new, effectively mandatory workout regimen–similar to what some in Congress are calling for now for private loans–aren’t in yet.


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