Wait just a minute. As I am catching up on all the various news in the home ownership arena, I had to read this story to see if it was going to tell me anything new that I did not know. Well of course it did. Title was Foreclosures Hit an All Time High. Well you better believe this is an all time high. Look at the subtitle below:

Over 900,000 borrowers are losing their homes, up 71% from a year ago, and a record number of home owners are behind on their payments. Stop the press – 900,000 borrowers. Before long that number will be over a million. Up 71% from a year ago wow! WOW! So how many of those people are getting help. Have any of these people tried to go into a FHA Loan of some sort? Remember there is the FHA Secure or any other FHA product.

There are clearly more people fighting the FORECLOSURE battle than initially suspected. I would even go so far as to say probably everyone knows at least one person that is facing foreclosure and that person knows someone. We have all heard of six degrees of separation which I continue to find out that is true and somewhat maybe even less than that.

Imagine for a moment if you will, I want to add the Colorado Rockies to this analogy because last year they made it to the World Series. Okay, let’s imagine that there are three men on base and there is a guy up to bat. The guy at bat is thinking if I hit a home run, everyone will go in. Bases are load and the first ball is thrown. It is clearly a ball. The second ball is thrown and it a strike. Everyone on the bases is thinking this guy has a history of hitting home runs. The third ball is thrown and he hits a homerun. It is so far out of the park the other team could not even think about trying to catch it. Think about this happening 900,000 times for all those borrowers that are losing their home.

Maybe they were on base 1 and attempted to contact someone before they became behind the first time. Well nothing happened. Then they made it to second base and became behind two months. Since no one contacted them they did not roll the dice. Then they got to the third base and became behind more than two months. Then they reached that crucial month and now it is too late. They are facing foreclosure. They just became one of the 900,000.

What you have to say to yourself is you do not know all the different situations that have led up to the foreclosure for these homeowners. It could have been job loss, health issues, predatory lending or something else. I want to say brace yourself because I believe those numbers are going to continue to rise. We have not even seen the worst of these headlines. Every day clearly someone is facing a choice that they do not want to make regarding housing.

Dr. Taffy Wagner

An interesting article appeared on the online magazine Slate last Thursday that pointed out a factor in the mortgage meltdown that most media are ignoring: stated-income loans. These loans, more commonly referred to as Liars’ Loans, allowed individuals to state their income without verification. The author, Mark Gimein, uses this great analogy to explain the situation:

Imagine a city center where running red lights isn’t something that the occasional drunken driver or road-rage victim does, but where everybody does it all the time. That’s a lot like the mortgage market in big swaths of the country one or two years ago.

He continues the analogy to describe the unbelievably high number of people (with relatively good credit) whose homes were going into foreclosure:

Think about that city center again. All those cars speeding through those red lights. And crashing.

I’ve written a lot about why I think FHA loans are, and always have been, a better alternative to sub-prime loans. The gross failure of stated-income loans shows that even when FHA was being ignored across the board, the system used to obtain an FHA Loan would have prevented this widespread practice. With FHA Loans, borrowers must prove to the lender that they have enough income to pay their loans and show that they have an employment history that is steady and they will, therefore, be more likely to continue to have such an income.

Though the FHA system clearly needs some updates (and fast), examples such as these show that the FHA process is, and always has been, much more sound than many of the popular mortgage practices used by so many over the past decade.

We’re proud to announce the FHA Mortgage Center.com Best Blogs Contest.  Our goal is to highlight the best real estate related blogs on the web.  The contest is based on the quality of the content of the blogs so there’s no special post or linking required!

Feel free to submit your own blog or encourage any bloggers you know to add their sites via the submit page.  We’re offering three awards of $500 each.  The first award is the “Fan Favorite” which is based solely on the popular vote that a blog earns, the second is Editor’s Choice for our staff’s favorite blog, and finally there is a random award to reward anyone for taking the time to submit their blog.  Best of luck and thanks for taking the time to take a look at our site.

We decided to create a loan glossary to help everyone learn more about mortgages.  It’s a work in progress, we only have  a, b, c, d, e, f, and g finished, but the rest are coming soon.  The rest of the glossary is being written so please check back soon.  Let us know if you see any errors.

President Bush has announced Steven C. Preston as his nominee for the new Secretary of the Department of Housing and Urban Development (HUD). Preston is currently the head of the Small Business Administration. According to Bloomberg News:

“Steve Preston is an experienced manager,” Bush said at the White House with Preston, 47, by his side. The housing department “requires strong leadership at a time when our housing market is experiencing a period of challenge and uncertainty.”

Let’s hope that Preston’s experience with the SBA will help him understand the pressing needs of HUD and the FHA.

Last week a third plan was announced by the White House as a solution for FHA reform. According to Forbes.com:

As outlined by FHA Commissioner Brian Montgomery this morning, the White House proposal encourages lenders to reduce the principal on loans, in exchange for FHA insurance for the renegotiated loan. Sound familiar? It should to those following Washington’s fight over how best to help troubled homeowners.

Rep. Barney Frank, D-Mass., the chairman of the House Financial Services Committee has the same provision in his bill, as does Sen. Chris Dodd, D-Conn., who proposed the Senate version. And a federal program called FHASecure already provides a limited version of this service, allowing homeowners who became unable to pay their mortgages after adjustable rates became to high, to refinance into an FHA-secured loan.

What does get lost in this plan is Representative Frank’s proposed “Refinance Program Oversight Board”, instead of refinancing large amounts of homes at a time, taking them on a case-by-case basis. I’ve said it before and I’ve said it again, there are a lot of proposed solutions out there, but proposals aren’t getting anything done. I recommend these committees be locked up in the Capitol building until they hammer something out. Anybody with me?

As I was reading more about the housing industry, I discovered that approximately a week ago E-Loan announced that it is going to offer FHA Loans to help millions of customers in this ever increasing tightening credit market. I can just see people now, getting online and going to e-loan and completing an application. We have all read about home values are declining all across the nation. This will give home owners the opportunity to keep their piece of the American Dream.

I applaud E-Loan fully for providing this opportunity to these millions of families. We all know what FHA has to offer such as lower down payments, the downpayment can also be gifted from a relative, they have borrowers from all across the credit spectrum and even more. Let’s face it, even with those few qualifications there are more people that should be able to qualify and get the desired assistance they are looking for.

Every day someone is facing impending foreclosure due to a lack of information, help and even fear of talking to someone about their financial situation. One thing that appears to me is that with E-loan you do not have to physically face a person and should be able to get the majority of this handled through an online source. I have to say this because I remember when I was dealing with difficulty in my finances and the last thing I wanted to do was talk to someone face-to-face that was near and dear to me because it hurt. It was easier to talk with someone who did not necessarily know me and there was no judgment being passed.

FHA Loans are available on many different levels – not only can the first time home-buyer get a FHA Loan, there are also products for people who are refinancing, FHA Secure and more. I strongly recommend you go through this blog and see the different products that FHA has to offer. The answers could literally be within your reach and you miss it because you are not taking the time to review each area. Take a deep breath and sit down and read all the information.

Let me give you a prime example of what I mean. I had a colleague share with me the other day about a foundation that could be of some interest to us on a project we are working together own. When I went to their website, I was very impressed and share with the colleague we should definitely speak with them. Tonight, I was looking through some of our local papers and community papers before throwing them away. Little did I know, when I was going through our community paper that same foundation was in there about them beginning a chapter in our neighborhood. That information was printed over a month ago but because I did not read the paper when it came, I did not have the information. Now that I know about them, sure it adds some credibility and I have to think maybe we were not ready at that time to get the information.

I am saying that to say, maybe you have looked at FHA information before and did not see how it worked into your situation. Stop and take the time to review it again and maybe your eyes will be opened.

Dr. Taffy Wagner

I finished my last blog sharing about Senator Clinton’s housing plan and discovered that Senator McCain’s was out. So I decided to go back and also include his proposed solutions. Once again this was taken from Mortgage Daily News.

He restated the history leading up to the current situation and placed the blame for the crisis on:

1. Speculators who moved into the housing market during the bubble and overwhelmed normal market forces with rampant speculation.
2. Lenders who became complacent because of the sustained period of rising home prices and consequently failed to maintain their lending standards.
3. The explosion of complex financial instruments that were not well understood even by sophisticated investors and were largely off-balance sheet and hidden from scrutiny.
4. A crisis of confidence arising out of initial losses in the market which has caused banks to no longer trust each other and credit to dry up.

Calling it “straight talk,” Senator McCain said, “I will not play election year politics with the housing crisis.”

“I have always been committed to the principle that it is not the duty of government to bail out and reward those who act irresponsibly, whether they are big banks or small borrowers. Government assistance to the banking system should be based solely on preventing systemic risk that would endanger the entire financial system and the economy.

The Senator said that no assistance should be given to speculators and that any aid should be limited to homeowners and their primary residences, must be temporary, and not reward people who were irresponsible at the expense of those who weren’t. “I will consider any and all proposals based on their cost and benefits.”

His most specific proposals include:

1. Reforms to the system including transparency and accountability. Homeowners should be able to easily understand the terms of their mortgages and in return should provide truthful financial information and be subject to a penalty if they do not.
2. Lenders should be held accountable for the quality and performance of those loans and strict standards should be required in the lending process.
3. The Senator said he opposes proposals to reduce the down payment requirement for FHA mortgages and that, as conditions allow, the existing down payment requirement should be raised.
4. Financial institutions should be encouraged to increase capital reserves to serve as a buffer against losses. Methods of encouragement should include removing regulatory, accounting, and tax impediments to raising capital.

These four, the Senator said, would be the principals against which he would examine and evaluate new housing proposals.

I have read his proposal and I have a question I want to ask the readers. When I read number 1 where he talks about reforming the system. He goes on to talk about homeowners understanding the terms of their mortgage and if not there should be a penalty. I want to ask the readers their thoughts on that? Send them in. We want to hear your thoughts and answer your questions.

Dr. Taffy Wagner

Is there any doubt to anyone that if people cannot keep up with their mortgage, it would spill over into other areas? If people are delinquent on their mortgages, you better believe that it will spill over into credit card payments and even auto payments. People do not become delinquent to become delinquent. That can mean several things (1) employment could have changed; (2) a husband and wife could have divorced and the person who keeps the house is not able to afford it; or (3) over the last few months they have really been trying to keep everything together but with the adjustable rate – adjusting they are not able to keep up.

The inability to keep up with the adjustable rate has spilled over into their car payment. The first time they are not able to make their car payment, they do not feel as bad because they already believe they will be able to catch up in the next couple of weeks. So the first time, they are actually accepting this happened. But the third time it happens, they are in a panic situation because they realize this is not the only bill they can no longer afford. The mortgage has turned into such a nightmare, they are desperate for resolution.

When you become desperate for resolution you do not see things as clearly as if you were level-headed and calm. You open yourself up to be taken advantage of and making unwise decisions. When I saw this story last week about the mortgage market having an actual melt down, I could not wait to see what was happening. Apparently as we all knew it, foreclosures is not over. Federal Reserve Chairman Ben Bernanke continues to pledge to do all that is possible to help struggling homeowners. Many people already think we are on the verge of a recession.

I have to tell you it seems that so many things are upside down, will homeowners truly be able to be helped. I continue to look in my neighborhood and more houses are having for sale signs in the neighborhood. Even those homes that I thought everything was okay, leads me to wonder why those homes are now for sale. It is because they are trying to get out before their homes no longer have any value or is it a job transfer? What would you think.

Bernanke shared which we already knew, “abusive, unfair or deceptive lending practices led some borrowers into mortgages that they would not have chosen knowingly.” What is the solution to this. Many are still feeling deeply the consequences of these lending practices. One of the bad parts is that these consequences are far reaching and could reach to the generations versus just the parent, aunt or uncle that is currently dealing with this.

When I said domino effect, sure it affects other items that must be paid on, but it can also affect a youth when making choices based on what they saw growing up.

Dr. Taffy Wagner

Ever wondered where all that money for HUD is going, well Alphonso Jackson spent one-hundred grand on portraits – five of them. Hopefully our next HUD secretary will have different priorities when it comes to spending HUD funds.