For immediate release:
September 6, 2007
Contact:
Gerri Detweiler
888-774-6280 x 2
FHASecure Program: Doors Closed For Many Distressed Homeowners
Milwaukee WI, September 6, 2007 -- Government estimates that the FHASecure program will rescue as many as half of all consumers going into the foreclosure over the next two years are wildly optimistic, reports Lender Rate Match, provider of the FreeRateSearch.com mortgage search engine for borrowers. Homeowners in distress may not be able to use FHASecure to refinance for a number of reasons, including:
- Loan size limits that are too small to be helpful in higher cost areas of the country. Congress should raise these loan limits as requested in the FHA modernization proposal. Even then, however, this program won't meet the needs of homeowners in very high cost areas like California or cities like New York.
- Credit standards are likely to be too difficult for many subprime borrowers to meet. Approximately 2.5 million subprime loan interest rates are resetting this year and next. Subprime borrowers, however, usually have lower credit scores. It is unlikely that their credit problems have disappeared since they obtained their mortgages.
- Equity or cash of at least three percent may be too steep for borrowers who bought their home with little or no money down ? before house prices declined. Consumers who are "upside down" and owe more than their home can appraise for will be unable to take advantage of FHA loan program, or any loan program.
- Demonstrating stable employment and income will be a problem for many homeowners who obtained a "stated income" where they were allowed to list income without verification, as well as those who have recently lost their jobs. Self-employed borrowers may also have a difficult time meeting employment verification requirements.
- Risk-based mortgage insurance premiums (MIP) can be expensive for strapped borrowers. The cost of MIP was one reason why FHA has been dropping in popularity over recent years. Instead, homebuyers have turned to conventional "combo" loans, which combine a first and second mortgage to avoid MIP or private mortgage insurance (PMI).
- Investors and second homeowners are unable to use the program to get out of expensive loans. In some areas of the country, such as Florida and Nevada, the high numbers of defaults are linked to a large number of investor loans. While those foreclosures will not result in homeowners losing the "roof over their head", they will still serve to drive down home prices and make it more difficult for others trying to sell their homes to do so.
Lender Rate Match data show that risky adjustable rate mortgages were not necessary for most subprime borrowers who obtained them in the past two years. Because consumers have not been able to compare subprime loans themselves, they were easily steered into loans that were better for the lender than the borrower.
Detweiler recommends that, in addition to learning about the FHASecure program, home loan shoppers also use the FreeRateSearch.com search engine for mortgages. It allows consumers to search available loans, subprime to prime, and receive an instant quote. Borrowers are also matched with a single lender who can help them obtain that loan. They can compare the results of the search engine with loans available from an FHA lender.
"For some homeowners, the FHASecure program will be a godsend. But for many, it will offer no relief," says FreeRateSearch.com Education Director Gerri Detweiler. "It's clear that, going forward, consumers need to shop aggressively for their next loan and not blindly look at FHASecure, or any other loan program, as their only option."
Note to reporters and editors:
Lender Rate Match LLC offers extensive data detailing subprime loan rates and programs over the past two years, as well as charts describing current subprime rates. These are available to your publication at no charge. Please contact us for more information.
About FreeRateSearch.com
A service of Lender Rate Match LLC, FreeRateSearch.com was created by mortgage banking executives and employs proven mortgage pricing technology currently used by select mortgage underwriters, loan originators, and mortgage banking firms. FreeRateSearch.com is the first website that allows consumers to search for customized, unbiased mortgage rate information from multiple lenders, quickly and accurately. Its mission is to help match consumers save money by connecting them with a lender who will match the best available rate. Contact: Gerri Detweiler at 888-774-6280.
Note: FreeRateSearch.com and LenderRateMatch are trademarks of Lender Rate Match LLC.