President Bush’s speech today supporting FHA reform and assistance to those facing foreclosure was a huge victory for the modernization movement. There are details of the speech on the White House website.

Here’s a list of national sources covering today’s speech:

Here is a spot on analysis of a New York Times story about Countrywide Financial’s widespread problems. Not only does it effectively provide readers with the best summary of the article, there’s clever commentary to boot. That’s my kind of blogging!

The Atlanta Journal Constitution gets it right! Their intrepid reporter contacted mortgage experts who gave the paper the lowdown on different types of loans, plus honest-to-goodness pros and cons. Here’s what they said about FHA:

FHA LOANS: FHA loans are backed by the federal government and generally have relaxed credit guidelines. They also allow lower down payments for first-time home buyers and come in a number of different loan products ranging from one- to five-year adjustable-rate mortgages to 15- and 30-year fixed-rate mortgages.
• Pros: The FHA loan program has down payment requirements that are low and credit requirements that are less stringent. The adjustable-rate products are good at protecting the borrower from severe rate increases.
• Cons: Borrowers may be required to pay upfront mortgage insurance premiums as well as monthly premiums.
• Most suited for: First-time home buyers and buyers with limited savings for a down payment.
• Least suited for: Buyers who can afford a 20 percent down payment.

This is the kind of educational information the needs to be out there and accesible to all consumers. Bravo!

No matter how bad the sub-prime market gets, some people really are not willing to give FHA a fair shake. Upon doing a Google news search today I happened across an article entitled “Don’t Get an FHA Loan” “FHA or Conventional”.

Obviously this guy wants people who read this to say NO to FHA. Every single mention of FHA loans are positioned negatively in relation to conventional loans. At the very end he mentions that “FHA loans are good for some borrowers in certain situations.” However, neither these borrowers nor these situations are ever mentioned. The entire article up to that point only points out the negative things about FHA loans. Sure, I think FHA has some areas that need to be fixed - that is precisely why I support modernization! But there are also lots of great things about FHA loans that deserve mentioning in an article that is a shamelessly one-sided sales pitch comparison.

UPDATE: As the author of this article pointed out to me, he does have a supply of helpful FHA information on his site that can be accessed via his sitemap. That being said, I still found the article incredibly one-sided and if I were a borrower who had come across that after searching for “FHA loans” I would have looked no further because no positive merits of FHA were mentioned in the comparison. On the whole, his site does present both sides of the issue, but definitely not in that article.

I recently spoke with Mary Trupo of the National Association of Realtors (NAR) about the current FHA modernization situation. Like many supporters of modernization, Trupo stressed that time is of the essence when it comes to making changes to the FHA. This is particularly important, she explained, because of the escalating situation with the sub-prime market. “If we can modernize FHA quickly we can A) Make sure people don’t run into the same problems of today and B) Help others affected by the sub-prime problems,” she said.

Trupo credited the strong bipartisan support for modernization as the most powerful factor in moving things along and commends Chairman Frank and his committee members on the Financial Services Committee for working quickly. NAR’s hope is that the issue will remain in a prominent position on the calendar.

As for the controversial issue of down payments, NAR supports the House bill with a 0% down payment. According to Trupo, the Association could also get behind Senator Dodd’s proposal for a 1.5% cash down investment. The cash down would serve as a commitment to a borrower’s investment and a safeguard against foreclosure.

I’d like to thank Mary Trupo for taking the time to speak with me and providing a great kickoff for this series.

According to a televised report on MSNBC and an accompanying article on MSNBC.com, the sub-prime mortgage industry isn’t ready to give up yet. Even with the collapsing market, there are still advertisements for sub-prime loans that offer the so-called teaser rates. The legaltily and ethics of the situation are both questionable.

“There’s nothing necessarily wrong about lending money to people with bad credit,” said David Nahmias, U.S. attorney for the northern district of Georgia, who has worked on mortgage fraud cases. “Our concern is more the independent mortgage brokers who will try either to trick people into purchasing properties they really can’t afford, solicit those people to lie, let them use their identity or credit so they can perpetrate mortgage fraud.”

Missing from the report is how FHA is an honest option for those with poor credit. Unfortunate.

Bloomberg is reporting on figures from RealtyTrac that foreclosures in July are up 93% from last year! Although this sounds devestating, it turns out over half of these are from 5 states. So, it is pretty devestating for California, Florida, Michigan, Ohio, and Georgia and only moderately crappy for the rest of us.

All this doom and gloom may have you feeling very down in the dumps, but fear not! As Forbes points out, all this housing trouble may light a fire underneath the progress of FHA modernization. This is similar to the earlier story about how reforms should get moving after August, but its got the added delight of some bytes from HUD’s assistant secretary Brian Montgomery:

“Every day that we don’t get some sort of reform is a day that we can’t help families that are trying to get out from a high-cost exotic subprime loan,” Montgomery said.

Yes, FHA will be great for first time home buyers and those who are trapped in ever-rising ARMs.

New York Magazine presents a detailed history of how the subrpime boom got us to where we are today. It’s an almost poetic, information-packed read. And that’s just the first page! A snippet:

Where did the money come from? Banks lent it, mortgage brokers lent it, and even home builders themselves got into the act. The housing markets were so hot the lenders barely had time to check if their buyers were deadbeats, cheats, speculators, or actual honest-to-Betsy hardworking people who wanted nothing more than what Tom Joad wanted 70 years ago. Oh, and the buyers didn’t have time to check out the terms, either; the value of the houses was going up too fast. Gotta close now! Nor did the regulators tap the brakes—whoops, there were no regulators. If something went wrong, who cares? The buyers could always sell their ever-appreciating home to the next guy on the reservation list or the ten after him. The builders, brokers, and bankers then shipped these mortgages east to the big Wall Street firms, which bundled them together and merchandised them as high-yielding bonds often backed up by nothing more than the full faith and credit of, well, no one.

The article goes on to look at the nationwide implications of the bust by explaining that this crisis goes way beyond home foreclosures and into the over pricing of bonds on the market. The author, James J. Cramer, does a great job pulling apart all of the complexities and laying them about one by one, and the picture isn’t pretty.

At the end of the day it’s recklessness abound. Although no one will accept it, everyone’s to blame.

Larry Cragun over at the Real Estate Undressed Blog has a terrific anecdote about the big problem with not just sub prime loans, but many sub prime lenders. Larry’s basic point is that lenders ignored the histories and needs of borrowers and just hucked them some crappy sub prime ARM. In one particular instance the borrower was an excellent candidate for an FHA loan - practically a poster child. Experiences like Larry’s are one more reason why FHA needs to be back in the forefront for borrowers and lenders.

Plus, kudos to Larry for mentioning the pros with the cons. As mentioned the other day here, Larry also recognizes the problems with all the FHA red tape.