(Robert has 20 years experience within the mortgage banking industry and is a creative writing contributor to www.RealEstateLawyers.com ).
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In light of the massive foreclosure activity looming on the horizon, legislative representatives are contemplating what could amount to a multi-trillion bailout for homeowners unable to maintain mortgage payments. This immediately raises several questions.
1. Since FHA insures 20% of the loan amount, and this mortgage insurance is typically collected up-front at the time of closing, will the homeowners currently facing foreclosure be required to make the customary up-front mortgage insurance payment that other’s have? Since this premium is based upon the loan amount, with an average home loan of $300,000, the homeowner would be required to pay almost $9,000 in cash (up-front) to convert to an FHA (unless there was sufficient equity). So if a person can not pay a $2,000 mortgage where is the money for the insurance going to come from? Are we just delaying the inevitable?
2. Will there be any deviation from standard FHA credit and income underwriting approval guidelines? So many of the troublesome sub-prime loans were funded without any sort of income verification. Will FHA make adjustments to its guidelines to accommodate these homeowners and if so, why? Would it be fair to grant special concessions to a person that may not otherwise qualify for an FHA loan?
3. What is the cost to tax payers for the existing FHA loans going into foreclosure (which by the way is also on the rise) let alone the financial liability of absorbing the sub-prime fiasco? No one can say with any degree of accuracy exactly when or where this will end, or how much it would ultimatley cost tax payers.
4. If there is any deviation what-so-ever from standard business practices at FHA to rescue sub-prime homeowners, would that be a fair and equitable use of tax payers dollars from that percentage of the population which rents? Should homeowners receive preferred treatment, or should FHA or HUD enact a rescue program for renters that can not pay their rent?
Do You Think This Is Fair
Should renter’s tax dollars be used to meet the obligations of homeowners without receiving in turn an equal financial benefit or at the very least some type of tax credit for real estate gamblers?
Brother, can you spare a dime?
Posted by robertsworld 
