As most real estate-conscious people are aware, on August 31, 2007, President Bush announced the creation of FHASecure in an effort to prevent the foreclosure of tens of thousands of homes in the US. But will this plan work? Or will it go to far? On the other hand, will it not go far enough?

Backed by the government, FHASecure is enabling homeowners who have a history of on-time mortgage payments under their original interest rates, but missed payments after their rates reset, to refinance into FHA’s mortgage insurance program. Families with high-cost mortgages and mortgages that are due to reset, but are still current on their loan, also continue to refinance through FHASecure. This is a more viable option because FHA-backed loans are less likely to result in foreclosure.

But some skeptics caution that this plan goes to far. They argue that FHA Secure will result in the loss of millions of dollars of revenue by US banks that would have otherwise been collecting monthly mortgage checks from borrowers who might not have actually faced foreclosure. Without FHA Secure, many borrowers might have been able to reassess their financial expenditures or negotiate with their bank in order to take themselves off of the foreclosure path while remaining on the same loan, with the same bank. However, since FHA Secure is an option, many borrowers will opt to leave their current bank and refinance through FHA, leaving many banks with fewer and fewer borrowers, especially in a time when so many borrowers have become nervous to borrow. Additionally, some propose that we may even see borrowers intentionally miss payments after their interest rate rises, so that they can qualify for FHA Secure. The result of all of this, the argument goes, is a continued decline in the markets tied to the financial prowess of the banks in this country.

On the other hand, some claim that the FHA Secure initiative does not go far enough. They claim that it omits certain borrowers who are in desperate need of mortgage salvation but do not qualify for FHA Secure because they missed some mortgage payments right before their loan reset or because their loan reset too soon. In other words, FHA Secure will not save all of those that need and perhaps deserve salvation from foreclosure.

So will FHA Secure work or not? Time will tell. According to HUD Secretary Alphonso Jackson, more than 33,000 borrowers have already refinanced their subprime home loans with FHASecure. An additional 20,000 are in the pipeline for approval this month, bringing the total to more than 53,000 in a four month period. Tell us what you think about the FHA Secure initiative.

We at MAA invite you the consumer to let us know about any person, business, organization, or association, whether public or private, for profit or not for profit, that is having a positive impact on the lending industry.  Here we are looking for information about companies that are doing what they can to restore ethics, reliability, and accountability to the residential lending industry.  Blog on!