Congressman Barrett Supports FHA Discretion
Congressman Barrett Supports FHA Discretion
Protects taxpayers from insuring unfit borrowers
WASHINGTON, D.C. – Congressman Gresham Barrett (SC, 03) introduced an amendment today to H.R. 5830 - the Federal Housing Administration (FHA) Housing Stabilization and Homeownership Retention Act of 2008, during the House Committee of Financial Services in the following speech.
“This is a simple amendment; it would strike the section of the bill that prohibits the FHA from denying borrowers entry into the new FHA program ‘solely on the basis of the mortgagor’s current FICO or other credit scores, or any delinquency or default by the mortgagor.’ In other words, this amendment would allow the FHA to protect the American taxpayers by giving the FHA the authority to use individual pieces of information that reveal the risk of borrowers’ defaulting.
“I believe that the FHA should be allowed to use all of the tools available in order to determine which loans the taxpayers should be responsible for in case of default. It is not fair to the American taxpayer to insure the loans of the riskiest borrowers who may not be able to pay their mortgage no matter what the terms of the loans. My constituents in South Carolina, who work hard and spend wisely, and pay too much in tax money, should not be forced to insure the loan of someone who has an abnormally low credit score that reflects problems paying loans in the past.
“I am concerned that this provision in the bill denies FHA perhaps the two greatest indicators of a borrower’s ability to manage their mortgage: their credit history and their loan history. I worry that we are encouraging the FHA to repeat the same mistakes of many private mortgage brokers and lenders, and that is - not doing enough due diligence to determine the credit worthiness of borrowers.
“I understand the motivations of this section of the bill - to try to include as many people as possible in the program without letting a single marker preclude their entrance into this program meant to help them. I am sympathetic to these borrowers as well. However, unfortunately, there may be borrowers whose loans are too risky for the American taxpayers to insure, and these markers, such as credit score, are meant to reflect the risk of borrowers.
“We should not prohibit the FHA from telling a borrower with an unusually low credit score from saying that person is too great of a risk to insure. We should also give the FHA enough discretion to protect the American taxpayer from risky loans from people with scores of past delinquencies on any mortgage. People who have low credit ratings or pasts checkered with mortgage delinquencies or defaults pose an elevated risk to lenders no matter what type of loan they get. Simply, the FHA should get as much discretion as possible when determining which loans the American taxpayer should be exposed to. Otherwise, I worry that we are just throwing good money after bad,” said Congressman Barrett.
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Finally a solution to the housing crisis that will work
The Democrats and Republicans have agreed on a 300 billion dollar plan that will help homeowners keep their home. One of the main reason people can’t refinance their home is because they owe more than the home is worth. With this new program the lender will agree to take 85% of the homes current value as a payoff. TaDa… problem solved.
There are groups that don’t think it’s fair for the government to spend money to help these people. They need to WAKE UP!!! When homes in your neighborhood go into foreclosure, they get sold at about half of the market value. This means your home is now worth less. If you are reading this and you own a home it is happening to you.
1 in 194 homes are now in foreclosure.
The consequences of all this are very bad. The last thing a person stops paying on is their home. If this problem isn’t fixed, I believe we will face the worst depression this country has ever seen.
The Bush administration is opposed to it. They think the program they came out with will fix the problem. Well last August when they came out with their program, foreclosures were up 27%. Today they are up 112%!!!
Every day my company has to turn away about 50 people who want to refinance and keep their homes. Most of these people can actually qualify based on their income.
HERE IS WHY THE GOVERMENTS PROGRAM TO HELP HOME OWNERS IN DISTRESS IS NOT WORKING.
I think it’s time for someone to get the facts to the public.
Last August President Bush directed the FHA to help home owners keep their home. Called the Home Secure program. Even homeowners in foreclosure were supposed to be helped. The FHA is supposed to do a loan for someone regardless of how low a score they have, as long as they have the ability to repay, and if the new loan will save them money.
THE PROBLEM is that the lenders who are supposed to be offering FHA, now have a policy of not doing a loan if the borrowers score is below 580. Most borrowers that need the FHA help are below 580.
If a person is facing foreclosure that means they have been late about 6 months on their mortgage. When that happens, their score will be in the 400’s. Before the administrations new policy the FHA would do a loan, but now the lenders won’t because of the credit score.
Even if you are just late twice, your score will be below 580. If a borrower has a score of 581 - 600 there is a 1.25% hit to the rate!
Recently FHA started offering higher loan limits, but is the borrower goes to the limit there is an additional 2.5% hit to the rate. So what good are the higher limits? Why are the lenders doing this when the FHA is guaranteeing it?
The bottom line is that lenders have found a way to profit from this situation.
I could go on about more, if you are interested learning more, contact me anytime.
Tjackson@keybranch.com
The public should know the BS that is happening.
Someone has to get the word out there!!!