BUSH ADMINISTRATION IMPLEMENTS EXPANSION OF FHASECURE MORTGAGE ASSISTANCE FOR ST

Fair and flexible insurance plan will help more families and better protect taxpayers against risk

WASHINGTON - The Bush Administration today implemented an expansion of its flagship mortgage insurance program to assist more homeowners who are struggling to keep up with their high-cost subprime adjustable rate mortgages. HUD's Federal Housing Administration (FHA) has expanded its FHASecure refinancing product to help bring liquidity to the housing market and insure more mortgages for borrowers who were late on a few payments and/or received a voluntary mortgage principal write-down from their lender.

"Starting today, even more families will be able to turn to FHA to find an affordable mortgage and save their homes from foreclosure," said HUD Secretary Steve Preston. "This broader FHASecure refinancing product allows FHA to reach even more troubled homeowners without putting taxpayers or its insurance fund at risk."

With this expansion, FHA is on pace to help 500,000 families refinance into a more affordable mortgage product by the end of this year. The plan, which is designed to help address the adverse economic conditions affecting many communities across America, will help break the cycle of house price depreciation that is being caused by an increasing number of foreclosures and the overall contraction in the credit market.

In August 2007, FHA initially modified its refinancing program to help creditworthy homeowners who missed their mortgage payments as a result of the payment shock associated with interest rate resets. Today, FHASecure is expanding its eligibility criteria to homeowners who have gone into default as a result of temporary economic setbacks. FHA will adjust the loan-to-value cap to provide an additional risk control, as follows:

1. Borrowers who are delinquent on their adjustable rate mortgages, but who were late on no more than two monthly mortgage payments over the previous twelve months are eligible for the standard 97 percent loan-to-value (LTV) FHASecure refinance loan.
   
   
2. Borrowers delinquent on their adjustable rate mortgages who were late on three consecutive monthly mortgage payments or at three different times over the past twelve months will be eligible for a 90 percent LTV ratio FHASecure refinance loan.

With these new criteria, the expanded FHASecure can help additional borrowers access a more viable refinancing option and will offer lenders an alternative to foreclosing on these individuals. Lenders may voluntarily write down the outstanding subprime mortgage principal balances to a 97 percent or 90 percent LTV ratio depending on the borrowers' circumstances. FHA will also encourage lenders to make other arrangements, such as subordinate financing, to "fill the gap" between the existing loan balances and the FHA-insurable loan amount. The refinanced loan amount backed by the FHA would be based upon a new appraisal, performed by an FHA-approved appraiser.

Like most other insurance companies, FHA will begin pricing insurance premiums according to borrowers' credit risk. To protect taxpayers, FHA will implement a fair and flexible premium pricing structure. Previously, FHA had a 'one size fits all' premium structure that charged borrowers 1.50 percent of the loan balance upfront and .50 percent annually regardless of their credit standing. product in a responsible manner.

"Fair and flexible premium pricing is a common sense solution to helping more lower-income American families stay in their homes and protecting the solvency of FHA. It is about time our pricing mechanism rewarded lower income families who live within their means and pay their bills on time," said Assistant Secretary for Housing - Federal Housing Commissioner Brian D. Montgomery.

An analysis of FHA borrowers showed that risk-based pricing actually benefits lower-income American families. Contrary to conventional wisdom, FHA families with the lower incomes have higher FICO scores because they live within their means and pay their bills.

Under the new structure, FHA's upfront mortgage insurance premium will range from 1.25 percent to 2.25 percent. Borrowers must continue to adhere to FHA's strict underwriting criteria, such as fully documenting their income and job history. This premium structure will preserve lower premium costs for FHA's traditional borrowers, including low-income and minority families who have a strong credit history and save for a down payment.

By charging slightly higher premiums based on risk, FHA will be able to extend the benefits of its FHASecure program to more homeowners affected by the volatility in the mortgage market. Borrowers refinancing into FHA from the subprime market are better off, even with slightly higher mortgage insurance premiums, because FHA insurance gives them access to substantially lower interest rates and lowers their monthly mortgage payments.

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STATEMENT BY HUD SECRETARY STEVE PRESTON ON PENDING HOUSING LEGISLATION

WASHINGTON - U.S. Department of Housing and Urban Development Secretary Steve Preston today issued the following statement regarding housing legislation that is being debated by the U.S. Congress.

This legislation is a mixed bag. The proposed legislation takes important steps to provide stability and confidence in the financial markets and in the institutions that support American's ability to gain access to affordable mortgages.

Yet, the bill ties our hands and denies us the proper tools to help more families. FHA has recently expanded its ability to refinance homeowners trapped in subprime adjustable rate mortgages. As we help more struggling families, FHA has implemented a fairer, more flexible pricing structure.

Unfortunately, this legislation would ban FHA's ability to charge differential pricing. Now, FHA will be required to increase prices on all customers or eliminate its refinancing program for subprime borrowers at a time when they need it the most.

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Difference of 560 and 660 credit score is hundreds of dollars!

Does credit scores make a difference in savings on your mortgage
payment? Here's a chart that clearly shows the differences.

Based on a 30 Year Fixed Rate Mortgage and a
$300,000 loan amount, here are the FISC Scores,
APR, and monthly payment amounts:

760-850...6.005%...$1,800
700-759...6.227%...$1,843
660-699...6.511%...$1,898
620-659...7.321%...$2,061
580-619...9.452%...$2,512
500-579..10.311%..$2,702

Notice the differences could have a dual impact, depending on
not just the score, but where in the range you are located.

For example, from the chart above, we see a score of 660 would
have a monthly payment of $1898. If the borrow would of had a
760 score, 100 points higher, they would have saved $98, $1176
a year.

Perhaps, that savings could have paid your car insurance for the
year, of the gas bill, or the cost of your cell.

But take a look at this comparison now, and this is why there is
so much talk about credit scores and the fact all consumers need
to take them seriously.

Let's suppose you were granted a loan with 560 score (actually,
those days probably are gone with yesterdays collapse of the sub
prime lending market).

You'd probably have to get a hard money lender to help you this
score. And you can expect much higher interest rates than you

see here in these tables.

But for the sake of our example here, we see the 560 score
requires the borrow to make a $2702 monthly payment (primarly
all interest --- because of the high risk a score that low traditionally
carries with it).

If that borrow could have worked on their credit and had improve
on making payments on time, they could bring their credit scores
up 100 points to 660 and have a mortgage loan payment of only

$1898 ----

Folks, that's a savings of $804 per month for a
100 point increase on their credit score.

Need we say more? That would be a savings of $9648 yr.

And this folks is why, so many people who are in debt over their
heads, and can't seem to get out. Because they do not realize
the sins of the past follow you for a minimum of 7 years and even
longer in some circumstances.

However if you can start tomorrow (like this author did years ago),
you can bring up a score by 100 points in less than a year.

And here is a million dollar tip (he us loud and clear)......

1. Get a checking account if you dont have one. Consider one
with no service charge. Many banks require only that your
balance not go below $500 to not be charged a service charge

on your account for that month. You need to check out the

different accounts!

2. Set up a FREE bill payer account that is linked to your checking.

3. Enter "all" recurring bills into your bill payer system. Be sure
the date you choose for the payment to be made is 7 days prior

to the due date. If you don't your payment through bill payer

could arrive late and you have defeated your purpose.

The recommendation to put all recurring bills (utilities, mortgage

payment, everything that comes on a statement every month)

into that account.

Now you will say, yeah, but the utility bill changes monthly. OK,

so talk with your utility company and get yourself on a budget plan

with them. The budget plan adds up the total costs of the utility

for the past 12 months, divides it by 12 and provides you the

average monthly amount.

If you opt for the budget plan process, your will pay a fixed fee

each month. Whatever that fee is, add $5 to your monthly

payment so you build a small reserve. Do that with each utility,

including your cell phone.

(Cell phone is harder to do)....

For me, I looked at my largest month and made that my average

and I know of no cell phone carrier who will allow budget plans so

I just send them that estimated fixed amount I figured out, and it

just overpays and builds a credit balance month after month.

Trust me, the bill payer process takes away the responsibility of

having to remember when to send bills. It will do it for you.

But remember, you to review the bill payer account at least once

a month. Just to see if you need to change anything.

By the way, I forgot to mention, is an SAFE ONLINE INTERNET

PROCESS with tons of security on it by the bank.

This account allowed me to make my payments each and every

month ON TIME EVERY TIME --- and that is precisely what the

credit bureaus measure to determine your score.

Like I say, this tip alone, brought my credit scores up 100 points

to 660 in about 12-14 months. Today my score sits at 802 and

has been in the mid to high 700's for many years! My wifes'

scores are even higher than mine! And think of the savings!

5 Factors That Decide Your Credit Score

Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage. The following factors affect your score:

1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.

2. How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it's a good thing if you have a good proportion of balances to total credit limits.

3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer's oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.

4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.

5. The types of credit you use. Generally, it's desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example.

Many Underestimate Credit Score Importance

While the nation's credit-scoring program is a critical factor in determining what individual borrowers pay in interest on credit cards and mortgages — and even how much they pay for insurance — new research suggests that most Americans still do not understand how the system works.

Respondents to a recent Consumer Federation of America/Washington Mutual Inc. survey largely did not know that credit scores are derived from payment histories, with many participants mistakenly believing that the number is influenced by such factors as income, age, education, and marital standing.

According to Anthony Vuoto of Washington Mutual Card Services, if all consumers took steps to boost their credit scores by at least 30 points, they together would realize as much as $28 billion annually in savings.

 

So, what You Can Do to Improve Your Credit?

 

Credit scores, along with your overall income and debt, are big factors in determining whether you'll qualify for a loan and what your loan terms will be. So, keep your credit score high by doing the following:

1. Check for and correct any errors in your credit report. Mistakes happen, and you could be paying for someone else's poor financial management.

2. Pay down credit card bills. If possible, pay off the entire balance every month. Transferring credit card debt from one card to another could lower your score.

3. Don't charge your credit cards to the maximum limit.

4. Wait 12 months after credit difficulties to apply for a mortgage. You're penalized less for problems after a year.

5. Don't order items for your new home on credit — such as appliances and furniture — until after the loan is approved. The amounts will add to your debt.

6. Don't open new credit card accounts before applying for a mortgage. Too much available credit can lower your score.

7. Shop for mortgage rates all at once. Too many credit applications can lower your score, but multiple inquiries from the same type of lender are counted as one inquiry if submitted over a short period of time.

8. Avoid finance companies. Even if you pay the loan on time, the interest is high and it will probably be considered a sign of poor credit management.

Companies Help Employees Buy Homes

In the wake of the housing crisis, more businesses are offering employer-assisted housing (EAH) programs.

Illinois was an early advocate of such programs, approving a law to provide a tax credit of 50 cents for every dollar that employers invest in EAH. Other states have followed suit, and similar legislation has been rolled out at the federal level as well.

The plans generally combine counseling services with down payment assistance. The down payment programs are usually loans that are forgiven if the employee stays with the company a certain amount of time, which also helps reduce employee turnover.

The programs appear to work. A recent study of one of the oldest EAH programs at Aurora Health Care in Milwaukee showed that the 208 employees who bought homes through the program stayed with the company significantly longer than average and performed better than other employees.

About closing costs ---

Closing on a property is a very challenging time for a would-be homeowner. Being informed, either through your mortgage broker, your real estate agent, or through self knowledge is the best thing you can be when going through this procedure.

A good real estate agent can help you tremendously. They should know the local market well enough to help you save money in whatever way they can. Since closing costs are handled differently in different areas, having a professional with experience in that area is your best bet. They can give you a better idea of what costs are customarily paid by the buyer, and which ones are paid by the seller.

(By the way: Beryl Gosney of Preview Properties has a long standing reputation for getting the closing costs paid for 95% of his buyer clients, with no out of pocket expenses at closing  including prepaids, he averages a $5,000 savings for folks).

The mortgage broker you deal with can make a big difference in your closing costs too. Have them show you several programs suited to your needs. There are lots of ways to structure closing costs based on your points and down payment.

After finding a property, you will want to get qualified by your mortgage broker. Your mortgage broker will send you a Good Faith Estimate within 3 days as required by law. A GFE is a list of your closing costs from your lender. There may be additional closing costs that the lender does not control, so always be prepared to pay for other items also. A good number to be prepared to pay would be to double the GFE amount.

Closing costs average 2.5-3% of your loan amount, and the exact amount will be told to you the day before the closing. All closing costs are to be paid at the settlement of the mortgage loan.

There are two types of closing costs

• Non-recurring closing costs are the ones that you pay once and never have to pay again.
• Recurring closing costs you pay repeatedly over the course of your home ownership. These would be items like property taxes or homeowner insurance. Property taxes placed in escrow are one of the largest expenses at closing.

The following is an alphabetic listing of the items that may be on your GFE. Some items listed here may not be on your GFE.

Loan Origination Fee
Loan Discount fee
Loan Application fee
Points to be paid
Lender's attorney fees
Buyer's attorney fees
Appraisal fee
Credit Report
Lender's Inspection fee
Mortgage Broker commission or fee
Tax service fee
Processing fee
Underwriting fee
Wire transfer fee
Interest from the day of settlement to the date of the first mortgage payment
Private Mortgage Insurance (PMI)
Hazard Insurance premiums
Property taxes from the day of settlement to the end of the tax year
Settlement or closing/escrow fee
Notary fee
Title search & Title insurance to protect your lender
Title insurance to protect you
Recording fees
Tax stamps
Pest inspection

Your closing procedure will go smoothly when you are armed with the right information and guided
by the right professionals.

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About VA Loans...

Uncle Sam has a gift for the men and women who serve our country. It is the VA loan. The VA loan, short for Department of Veterans Affairs home loans, is available to veterans, active service members, reservists, and members of the Public Health Service. These loans are so popular, that in the past fiscal year alone, Uncle Sam has guaranteed 300,000 VA loans totaling more than $38 billion.

Why are these loans considered a gift to our servicemen and women? Because VA loans require no down payment and are available from most lenders. Additionally, the government limits the amount of closing costs, origination fees, and appraisal fees. Because VA loan rates generally run the same as conventional rates, skipping the down payment is a big advantage. Not surprisingly, about 91 percent of VA buyers do just that.

Best of all, there is no private mortgage insurance (PMI) because the government prohibits lenders from requiring it. Not having PMI is a considerable cash savings for a borrower. For example, on a $126,000 loan, PMI would run approximately $40 to $64 a month for the first three to five years of a 30-year loan. The total savings? $1,440 to $3,840.

However, there is a downside:

* FUNDING FEES - In 1982 Congress levied a one-time funding fee on VA loans. And these fees can range anywhere from 1 1/4 percent to 3 percent, depending on the veteran's service and whether it's a first or subsequent loan. Although the VA will lower the fee if the borrower makes a down payment of at least 5 percent, and a buyer can finance the fee along with the home, there is a hidden cost. For example, on a $126,000 mortgage, a 2-percent fee can bloom into $14,474 over the 30-year life of a 6-percent loan.

* LOAN LIMITS - The maximum guaranteed is $240,000, yet buyers in high-priced markets such as California or Manhattan may have to evaluate other options for their financing. And while the eligibility certificate indicates how large a loan the government will guarantee, the vet may not be eligible. Just like a conventional loan, the actual mortgage amount will be based on income, assets, debts and credit history.

* QUALIFIYING - VA loans are available for active and former members of the armed forces who have a specific length and time of service and discharge conditions. Reservists and National Guard members may be eligible if they served at least six years and received an honorable discharge. Veterans discharged for a service-related disability are potentially eligible, as are some members of the Public Health Service and foreign veterans who served with the Allied forces during World War II. Additionally, a widow or widower may also apply for a loan, provided the spouse's death was service related. MIA and POW spouses may also qualify.

Applying for a VA loan is no different than applying for a conventional loan, except that one needs to obtain a certificate of eligibility from the VA. Not only are VA loans easy to get, Uncle Sam has made it even easier this year. The actual loan process takes about two to six weeks, the same time as a conventional loan. And just about every lender that handles FHA or conventional loans also makes VA loans.

Yet the greatest gift of all remains the fact that VA loans allow a buyer to purchase a home without investing a down payment. And that is a very good gift indeed.

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Some Basic About Private Mortgage Insurance (PMI)

Will you be asked to pay Private Mortgage Insurance, or PMI?
Most lenders will require you to carry PMI if you cannot put 20% or more of your loan amount forward as a down payment. PMI protects the LENDER in case you default on your payments. PMI does not protect you, the borrower. The lender will secure the PMI policy for you, and you will pay for it. Most people choose to have PMI added to their monthly mortgage payments, but other payment arrangements are possible. The monthly cost of PMI is based on your loan amount. An approximate cost of PMI for a $100,000.00 loan is about $50.00 a month.

Your Magic Number
When the equity in your home reaches 20%, you can have the PMI policy cancelled. Your monthly payment will be recalculated to reflect that you are no longer paying for the insurance, and you can save some money. But lenders do not have to cancel your PMI until your equity reaches 22%, so you can spend extra money on this that you don't have to. Your best bet is to figure the dollar amount that you need to reach in order to have 20% equity. Then, obtain an amortization schedule from your lender, and see when you will reach that figure. That is the date to keep in mind so you can cancel it without any extra cost to you.

It's Not Always Automatic
Not all people have the convenience of having their PMI automatically cancelled. The Homebuyer's Protection Act that requires lenders to do this does not cover loans that closed before July 29, 1999. It also does not cover VA loans or FHA loans. So be aware that you might not have someone else taking care of this for you. Check it out!

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Bailout Bills Working Their Way Thru Congress

House and Senate banking committee leaders are close to an agreement on
a landmark housing bill, according to sources, and the Senate might vote on
the measure this week.

Committee members and staffers worked over the weekend trying to iron out the
final details of a legislative package that would strengthen regulation of the
government-sponsored enterprises Fannie Mae and Freddie Mac, modernize
the Federal Housing Administration mortgage insurance programs, and
authorize the FHA to redfinance 400,000 to 500,000 at-risk borrowers to prevent

foreclosures.

Last Friday, a spokesman for Senate majority leader Harry Reid, D-Nev., said
the housing bill could come up for a vote as early as this week.

There have been concerns that the legislative schedule is so crowded that it might be
difficult to bring the GSE/FHA package to the floor before July Fourth.

Meanwhile, the most contentious issues involve how high to raise the
GSE/FHA loan limits and the use of taxpayer funds to pay for the
FHA foreclosure rescue package.

The Senate bill taps Fannie and Freddie to pay up to $960 million over three years to cover the costs of the FHA program -- an approach strongly supported by Sen. Richard C. Shelby, R-Ala., and other Republicans who don't want taxpayer funds used to bail out irresponsible homeowners.

The House bill uses taxpayer funds. Many observers believe that the House will have to agree to Sen. Shelby's approach in order to move the housing bill through the Senate.

Condo Associations To Report Money Set Aside For Long-term Maintenance

By Elizabeth Rhodes | Seattle Times business reporter

Attention, condominium shoppers: Washington soon will become one of a half-dozen states requiring condo associations to provide a financial-wellness check that can predict whether the place is a potential money pit.

The check, called a reserve study, estimates how much money an association must set aside to pay for expensive long-term maintenance, such as repaving a parking lot, replacing a roof or rebuilding rotting decks.

Although many associations require reserve studies, many have ignored their own requirements, local condo experts say. That will have to change June 12, when updates to the state's condo law take effect and associations must prepare and annually update such a study and make it available to buyers.

Calling it the "biggest thing to happen since the Condominium Act of 1990 was passed," longtime condo attorney Kris Sundberg says the new provisions will address "the dirty little secret of the condo world: Most condos are severely underfunded."

However, what the law does not do is to require that associations actually save the money their study finds is needed to cover future maintenance. Laws in a few states, including Hawaii, do.

"While this law may not put Washington in the vanguard, it clearly puts them toward the top of the list in being progressive on the issue," says Frank Rathbun, of the Community Associations Institute, a national nonprofit educational organization for homeowners associations and their members.

The reserve study must be done by a professional and can be waived only if it would "impose an unreasonable hardship," something the law does not define. Still, the associations group, condo attorneys and property managers call the change necessary, if somewhat overdue, for a growing segment of the housing market. A quarter of King County home sales are condos, and many buyers are homeowner novices.

"It will act as consumer protection for a lot of potential buyers and give them a better perspective of the true costs of ownership in a condominium association," says Marshall Johnson, president of The CWD Group, which manages about 90 condo associations in Seattle and Bellevue.

Sundberg, of Mercer Island, says that's been sorely lacking.

"We're seeing a substantial increase in litigation from unhappy purchasers who bought a condo then found out there's a huge special assessment being levied," he says. These irate buyers "go after the board, the manager, the real-estate agents, the seller," he says.

Considered a one-time cost to pay for major repairs, a special assessment is what associations turn to when they haven't built sufficient long-term savings in what's called a reserve account.

The account is separate from the annual budget, which pays for regular, ongoing expenses such as insurance.

When a special assessment is levied, owners are billed for their portions.

"We regularly see assessments in the $60,000 to $80,000 range per unit," Sundberg says. "Most condominium associations have neither a current reserve study nor adequately funded reserves."

That wouldn't surprise Jim Talaga, president of Association Reserves Washington, a reserve-study provider. Many 20-year-old communities have had little serious maintenance, he says.

An older 50-unit building could face $200,000 for a new roof and $70,000 for new exterior paint — with no money set aside to pay for them.

A first-time reserve study, on the other hand, costs about $2,500, although that depends a lot on the size of the community, Talaga says.

Matt Reed had first-hand experience with the reserves issue when he served on the board of a South Everett condominium. His underfunded complex faced at least $1 million in serious repairs because of delayed maintenance," he says.

The root of the problem, Reed says, was a membership of mostly first-time owners who hadn't made the mental transition from apartment dweller to homeowner.

"They were trying to defer all the responsibility and remain renters," he says.

After the board voted to levy a substantial special assessment, a group of angry owners successfully voted to override it, and the work went undone.

Faced with an emotionally draining stalemate, Reed sold his condo and bought a house.

The new law will make it harder for condo associations to conceal from buyers a lack of long-term financial planning. Those that use the hardship exemption to forgo a reserve study must disclose that to prospective buyers along with this warning:

"The lack of a current reserve study poses certain risks to you, the purchaser. Insufficient reserves may, under some circumstances, require you to pay" a special assessment.

Sundberg thinks having that in print may dissuade some buyers and lenders from investing in underfunded condos.

It will also affect their prices, Johnson predicts. "The unit that has minimal reserves is going to be cheaper than one with high reserves, so what they're saving by not putting into reserves will be lost in the price they get for it," Johnson says.

Once associations realize the true cost of scrimping on savings, reserve accounts will grow and the problem will correct itself, Sundberg says.

Meanwhile a real concern for associations is finding a qualified pro to do a reserve study. Several firms exist locally, but demand may overwhelm supply as associations attempt to comply with the new law.

Condo lawyer Brian McLean, of Leahy.ps in Kirkland, worked on the law's passage. He recommends that associations address this issue in their next budget cycle, research whether a reserve specialist is available and find out what the cost will be.

"This is a great planning tool, but no one wants this to cause a sense of undue urgency," McLean says. "I'm comfortable saying everyone has time to do this and do it right."

Elizabeth Rhodes: erhodes@seattletimes.com

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FHA Market Share Now Tops 10% - Consumers Should Benefit

Increasing demand for Federal Housing Administration-insured loans has pushed the FHA's market share above 10%, and loan endorsements in the first eight months of fiscal year 2008 already exceed the total for all of fiscal 2007.

"Since September 2007, FHA has helped pump more than $76.1 billion in mortgage activity into the housing market," FHA Commissioner Brian Montgomery said, and $30.3 billion of those loans have helped conventional borrowers refinance into FHA loans. The FHA endorsed 424,700 mortgages totaling $59.8 billion in fiscal 2007 when subprime lenders were still taking customers away from the agency.

Since the subprime meltdown last year, the FHA's market share has risen from 3% to 10%-12%, Mr. Montgomery told the National Press Club.

The latest FHA activity report shows mortgage applications running at a 2.1 million annual rate during the last two weeks of May, compared with an annual rate of 777,900 in the same period of fiscal 2007.

FHA loan endorsements are running at a 1.36 million annual rate, up 130% from that of a year ago.

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FHA Loans Revamped and Look Promising For Consumers Buying Homes

Federal Housing Administration (FHA) loans have become an extremely popular choice recently for Americans looking to buy a new home, or refinance an existing home. In fact, according to the FHA, the total volume of FHA loans has reportedly tripled in the last year alone – but why?

In recent years, the FHA has made some important policy changes in order to be more competitive. These changes, along with the effects of the subprime collapse and the subsequent credit crunch on the mortgage and financial markets, have combined to make FHA a valuable option for many Americans, especially first-time home buyers, borrowers with less-than-perfect credit, and borrowers with adjustable rate mortgages.

In this article, we'll discuss four specific changes that have turned the tide for FHA loans, and why you might want to take a closer look at this valuable option when you're buying or refinancing a home.

But first, let's examine why FHA loans fell out of favor in the first place.

Since 1934, the FHA has helped some 34 million Americans become homeowners. In 1965, the FHA became part of the Department of Housing and Urban Development (HUD) and would go on to become the largest insurer of mortgages in the world.

By 2001, the FHA simply could not compete as a proliferation of exotic and subprime mortgage products and easy access to credit helped homeownership levels in America jump to record levels as the housing boom was in full swing. It wasn't until late 2006 that the FHA began reviewing and changing its policies in any meaningful way – just in time for the subprime market collapse and the turn in the real estate market.

Earlier this year, Congress passed the Stimulus Act of 2008, which did more than just provide rebate checks. It also temporarily increased FHA loan limits in many regions of the U.S. And with that, FHA loans were back in business.

But what about those other policies that made FHA loans less attractive in the past? Well, the FHA drastically changed its appraisal and fee negotiating policies, making it much more competitive, and much better for both buyers and sellers. The FHA also made other changes that allowed 1) sellers to finance all of the buyer's costs to close, 2) homeowners to take cash out up to 95% of the home's value, and 3) homeowners to consolidate a 1st and 2nd loan up to 97% of the home's value.

Because of these and other features, FHA loans in many cases are actually a little bit cheaper for the borrower. Also, because FHA loans are federally insured, they tend to trade at a higher premium in the secondary market, and consequently, lenders can often charge a lower rate.

Most importantly, FHA loans are not FICO-score driven. Borrowers can have a lower score than other products and still qualify for a good rate. FHA loans also require as little as 3% down and, at the time that this article is being written, FHA loans allow down payment assistance programs, which allow the seller to cover the buyer's down payment and closing costs. This means borrowers, especially first-time buyers, or move-up buyers with limited funds, have a real opportunity to get into a home with little or no cash at closing. For sellers, this means you can offer concessions that make marketing your home much more attractive without having to lower the price of your home again.

In many regions of the U.S., FHA loans have not been utilized for years, so a lot of real estate agents and mortgage originators aren't familiar with this great resource. But, if you or someone you know is thinking about buying or refinancing a home, don't miss out on this temporary opportunity. Give us a call. We'll provide a free credit review and see if an FHA loan is right for your financial goals and needs.

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Everett I-5 Project Wrapping Up

EVERETT – This morning, WSDOT Secretary of State Paula Hammond joined Atkinson-CH2M Hill staff, state, local officials and the community to celebrate the final milestone of the I-5 Everett HOV freeway expansion project. The opening of two new I-5 HOV ramps at Broadway Avenue marks the last major piece of the third-largest project in Washington State history.

"With this project, drivers now have more than 200 miles of HOV lanes in the Puget Sound Region. It's one of the techniques we're using to ease congestion for commuters, transit and freight. We will continue to make our HOV system more and more complete," said Hammond.

The two new, side-by-side HOV ramps will serve carpoolers, vanpoolers and transit on northbound and southbound I-5. One ramp will carry northbound I-5 HOV traffic to Broadway Avenue. The other ramp will serve HOV traffic headed from Broadway Avenue to southbound I-5. Crews will open these ramps in time for the morning commute on Friday, June 6.

"WSDOT was a true partner and built the ramps with transit in mind making them longer with better merges. This makes it easier for faster for drivers and commuters and is the mark of superior planning," said Community Transit CEO Joyce Eleanor.

Drivers are already benefiting from a wider freeway and improved interchanges that are helping to smooth out traffic on I-5 through Everett. Since 2006, crews have opened a new Broadway flyover ramp, the new 41st Street interchange and more than two miles of auxiliary or general purpose lanes. In April, they opened more than 10 miles of new HOV lanes on I-5 between SR 526 and US 2.

"With gas around $4.25 a gallon, choices and options are important to drivers," said Snohomish County Executive Aaron Reardon. "This project is about letting drivers take control of their lives."

Everett Mayor Ray Stephanson noted the positive feedback from the community. "People approach me in the grocery store and say 'thank you,'" said Stephanson.

Crews meet challenges, reach goals

The Legislature accelerated funding for the project after Vancouver was chosen to host the 2010 Olympics. The project's original 2012 completion date was pushed up to 2009. However, crews beat that goal, delivering the $263 million gas tax-funded project a year early and within budget.

Using a relatively new method called design-build, contractor Atkinson-CH2M-Hill simultaneously completed the project design while construction was under way. This innovative method helped crews overcome several challenges, such as adding a $41 million interchange into the project after starting construction. At Thursday's event, Sen. Mary Margaret Haugen applauded the crews' work.

"This project was cost-effective and using the design build model was functional and an example of the great work WSDOT does," said Sen. Haugen.

Since starting construction in September 2005, crews have:

· Widened I-5 between Boeing Freeway and Marine View Drive

· Improved on-ramps and exits

· Added noise walls to help reduce freeway noise

· Embedded traffic loops and sensors in roadbeds to provide data for 17 new traffic cameras and traffic flow maps.

· Built or widened 23 bridges, including the new 41st Street interchange and Broadway flyover exit from northbound I-5

· Built stormwater facilities to treat over 280 acres of previously untreated runoff

I-5 Everett crews reached their goal of having all lanes and ramps open to traffic by June. Drivers can still expect minor work to continue through the summer as crews wrap up some final tasks:

--- Installing new traffic cameras and ramp meters
--- Laying down permanent striping
--- Repairing aging expansion joints between 41st Street and Everett Avenue

Find out more about the 2003 and 2005 gas tax-funded I-5 Everett HOV freeway expansion project by visiting www.wsdot.wa.gov/Projects/I5/HOVSR526toUS2.

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Government Helping More Families Avoid Foreclosure in National Homeownership Month

WASHINGTON - The U.S. Department of Housing and Urban Development today launched a month-long campaign to continue helping families avoid foreclosure. For the duration of National Homeownership Month, the Bush Administration will focus on how Americans can utilize the Federal Housing Administration (FHA) as a resource to keep their homes during this time of uncertainty in the housing market. FHA is at the center of the Administration's targeted, financially responsible efforts to help qualified homeowners refinance into safer, affordable mortgage products.

"Many Americans are facing the possibility of foreclosure and they need to be made aware of the options that are available to them through FHA," said Deputy Secretary Roy A. Bernardi. "To stop this cycle of foreclosure, Americans need to be better educated about the home buying process. They need to know what they are committing to when signing their name and know what mortgage best suits their needs."

This year's theme - "Back to Basics" - is designed to underscore the importance of having strong, common-sense fundamentals as a way to maintain a sustainable housing market. Many of those basics (verification of income, ability to repay) were ignored in the lead-up to the housing bubble. The Department will focus on helping families learn what the federal government is doing to help struggling homeowners; how to protect themselves against predatory lending; to better understand what goes into owning a home; and how to own a home they can afford.

At foreclosure prevention workshops and other events planned throughout the month of June, HUD officials will meet with prospective homebuyers and provide them with information to help keep them in their homes. On June 9, HUD's Assistant Secretary for Housing-Federal Housing Commissioner Brian D. Montgomery will deliver the keynote address at the National Press Club in Washington, DC. He will assess the overall state of housing and the role FHA is playing to stabilize the market and help families avoid foreclosure.

"During the month of June, we will continue to provide educational outreach across the country about the importance of getting the market focused on a back-to-basics approach. FHA has always been about the basics: verifying a borrower's income, ensuring their loan is affordable and helping them stay in their homes," said Montgomery. "We need to learn from the mistakes of the past to ensure that the American Dream of homeownership remains a bedrock of our society."

The Bush Administration has implemented a comprehensive plan to help families avoid foreclosure:

In April 2006, President Bush first sent Congress an FHA modernization bill that could have prevented some problems in subprime loans market from occurring in the first place. This legislation would allow families to refinance with safer, more affordable FHA-insured loans. Final legislation still has not been sent to the President for his approval, over two years later.

In August 2007, the Bush Administration launched a new initiative at FHA to modify its refinancing program, FHASecure, to help creditworthy homeowners swept up in subprime loans who missed payments after their teaser rates reset.

In February 2008, President Bush requested $65 million for housing counseling in his Fiscal Year 2009 budget request. The Administration has increased funding for HUD's 2,300 approved housing counseling agencies by 150 percent since 2001. Fifty million dollars was approved for counselors in Fiscal Year 2008. Another $180 million went to the non-profit NeighborWorks this year to help them counsel struggling homeowners on how to prevent foreclosures.

These programs are effective: 96 percent of households that saw a HUD-approved housing counselor and completed the program in the first three quarters of 2007 avoided foreclosure.

In March 2008, as part of the President's economic growth package, FHA temporarily increased its loan limits until the end of 2008 to help hundreds of thousands of more families in high-cost areas purchase or refinance their homes at an affordable price. The new temporary limits range from $271,050 to $729,750.

In March 2008, the Bush Administration proposed reforms to the Real Estate Settlement Procedures Act (RESPA) to help American homeowners better understand their mortgages and to allow them to shop for the best loan offer. Under this proposal, home buyers would be presented for the first-time ever with a standard form disclosing the important aspects of a loan. This new disclosure would ensure that home buyers are provided, early in the home buying process, complete, accurate and understandable information about their mortgages.

In April 2008, the Bush Administration announced an expansion of FHASecure, which will start in July, to help homeowners with subprime adjustable rate subprime mortgages who can no longer afford their mortgages and missed up to three monthly mortgage payments over the past 12 months. Rather than go into foreclosure, eligible borrowers can refinance with FHA and lenders can voluntarily write down the outstanding subprime mortgage principal balances. This will provide an equity cushion and protect taxpayers against risk.

Starting in July 2008, FHA will expand FHASecure using a fair, flexible premium structure. This pricing change, the first in FHA's 74-year history, will better protect FHA's solvency and ensure taxpayers do not assume the cost of this expansion by charging borrowers mortgage insurance premiums based on their credit risk.

More than 220,000 families have refinanced with FHA since September 2007. By the end of 2008, the FHA expects to help approximately 500,000 families stay in their home since the start of this effort. These policies complement FHA's strong loss mitigation program, which helped 65 percent of FHA borrowers who fall into serious default avoid foreclosure. Finally, HOPE NOW, a private sector alliance to help homeowners avoid foreclosure, recently announced that mortgage servicers have provided nearly 1.4 million loan workouts since July 2007.

Seattle ranks #10 for the best places to live in America!

Where's the best place to live in America?

Charlotte, N.C., leads Relocate-America.com's annual ranking of the top 100 cities.

By Amy Hoak, Marketwatch.com

Apparently, there's just something about North Carolina. For the second year in a row, America's best city in which to live lies within its borders, according to Relocate-America.com's annual list.

This year, Charlotte is in the top spot, the site announced late last week. Last year's winner was Asheville, which slipped to No. 7 on this year's list.

"North Carolina is very active on our radar," said Steve Nickerson, president and CEO of HomeRoute. "It continues to get a flood of interest from all over."

HomeRoute is the real-estate firm that operates Relocate-America.com, a source of community information and real-estate resources for people who are relocating. Each year, the site ranks the top 100 places to live in the country.

Areas need to be nominated on the site in order to be eligible for the list; more than 2,000 were nominated this year, Nickerson said. Special efforts are made to prevent spamming campaigns from influencing the results, he added.

But the site's editorial team also takes into account an area's growth, its educational and employment opportunities, crime rates and housing options before granting it a spot in the top 100. Environmental highlights also play a role, with a city gaining points for good air and water quality or the strength of its recycling efforts, Nickerson said.

Home-price appreciation does get some consideration; however, it's only one piece of the analysis, Nickerson said — explaining why some struggling real-estate markets in California and Florida, for example, still made the top 100. Areas that offer a comfortable climate and economic opportunity tend to be the most sought-after communities on the site, he said.

Charlotte's diversity of housing options and home affordability were two of the reasons users nominated the city, Nickerson said. The city's strong economy, boosted largely by the banking industry, was another selling point.

Second on this year's list was San Antonio, which people praised for its cost of living, recreational opportunities and diversity, he said. Chattanooga, Tenn., came in third place, noted for its vibrant downtown and affordable home prices in the nominations.

Below are the top 10 cities on Relocate-America.com's 2008 list:

• Charlotte, N.C.
   
• San Antonio
   
• Chattanooga, Tenn.
   
• Greenville, S.C.
   
• Tulsa, Okla.
   
• Stevens Point, Wis.
   
• Asheville, N.C.
   
• Albuquerque, N.M.
   
• Huntsville, Ala.
   
• Seattle

Read the full list at Relocate-America.com.

The firm also plans to release a coffee-table book on the top 100 soon, Nickerson said. Proceeds will benefit American Red Cross and Habitat for Humanity, he added.

The view from the top
Certainly, being ranked as the top city to live in has its benefits, mainly as a marketing tool for the area, said Tony Crumbley, vice president of research for the Charlotte Chamber of Commerce. An e-mail blast sent news of this list to thousands of residents, and the chamber actively keeps track of where Charlotte falls in many of the lists that are published.

"They are important," Crumbley said of the good rankings the city receives. But he also knows that these rankings come and go and that they're somewhat subjective; the city's appeal can change from one day to the next, depending on who is writing the list.

There weren't any significant changes in Charlotte during the past year that would account for boosting the city to the top of this particular list, he said. But the city definitely gets recognized a lot more today than it did 25 years ago, he added.

Bank of America and Wachovia have their headquarters in Charlotte, and it's also a hub for US Airways — all of which seem to have increased the visibility of the city outside its boundaries, Crumbley said. The addition of professional sports teams since the 1980s has also helped.

In recent years, Charlotte has been successful in attracting young, educated workers to relocate there, he said. Asheville, on the other hand, has become a popular choice with retirees, he added.

But cities can easily make it to the top of one list and rank poorly on another, he said. Case in point: One recent Forbes.com list ranked Charlotte as one of the country's most miserable cities, a ranking, not surprisingly, that Crumbley and others disagree with.

Forbes also ranked it as one of the best places to invest in foreclosures, in part because the real-estate market there is relatively stable.

"If they're good, you use them. If they're bad, I won't tell you you should ignore them — you look at them," he said of the lists on which Charlotte appears. But negative rankings aren't likely to end up getting used as a marketing piece for the city.

 

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Real Estate Market Analysis ending April 2008

ORLANDO, Fla., June 2, 2008 — Today eppraisal.com released their National Market Analysis Report for the three months ending April 2008. Of the 187 market areas tracked across the U.S., 34.2 percent show an increase in home values! 

WASHINGTON STATE has bottomed out (see the graph) and is starting to climb.

See a complete list of market areas tracked

California and Florida continue to lead the decline. Over 80 percent of the areas tracked within those two states saw a decrease in home values. For example, Merced, CA saw a double-digit decline to $192,000, which is an 18.64 percent decline. Punta Gorda was at the bottom of Florida's list with an 11.58 percent decline in home values to $145,900.

Despite the high rate of home value decline in Florida and California, some areas in those states did see an increase. Jacksonville, FL increased by 2.85 percent to a median home value of $179,000. In California, Redding and El Centro had an increase of more than 2 percent. They went to $232,000 and $235,000 respectively.

Other states showing reasonable gains in home values include Ohio, Washington, and the Carolinas. In Ohio, both Akron and Dayton saw over a 3 percent increase in median values. Akron increased to $109,000 and Dayton to $90,600. In the West, home values in Tacoma WA increased by 2.34 percent to $272,740, and Seattle-Bellevue-Everett saw a small increase of 0.73 percent to a median value of $415,000. In the Carolinas, Fayetteville, NC increased by 8.10 percent to $133,500, and Spartanburg, SC saw a 4.88 percent increase in home values to $86,000.

Flint, MI continues to remain at the bottom of the list with a 19.85 percent drop in its median home value to $44,000. Merced, CA is second from the bottom followed by Salinas, CA and Sumter, SC. Salinas, CA dropped by 18.37 percent to $400,000 and Sumter, SC dropped by 17.62 percent to 86,500. Overall, 13.4 percent of the areas tracked in the report saw double digit declines

The eppraisal.com National Market Analysis Report is attached. It shows the median sales price of existing single-family home sales in the three months ending April of 2008 along with the percent change from the prior three months ending January of 2008.

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FHA Re-finances & Saves 200,000 Mortgages From Foreclosure in Past 3 Months

WASHINGTON D.C. - U.S. Housing and Urban Development Deputy Secretary Roy A. Bernardi today announced the Bush Administration's FHASecure product has helped 200,000 homeowners refinance their mortgages and avoid foreclosure. Since September 2007, FHASecure has enabled struggling families - who are current or past due on their mortgages - to refinance through HUD's Federal Housing Administration (FHA).

"Over the past several months, FHA has been working to help families who want permanent relief from their high cost subprime mortgages," said Bernardi. "We are proud to have helped these struggling homeowners keep their homes."

"The Bush Administration's FHASecure product has quickly proven to be a responsible solution for 200,000 American families who are in the right house, but the wrong mortgage," said FHA Commissioner Brian D. Montgomery. "These homeowners have found affordable relief from their exotic loans, and FHA is on pace to help a total of half million families keep their homes by year's end."

In the past three months, FHASecure has insured twice as many loans as the program did in the program's first six months. From September 2007 to February 2008, FHA insured 100,000 refinanced mortgages. As more homeowners continued to learn about the benefits of FHA's traditional 30-year fixed, prime-rate financing, FHA backed another 100,000 loans in half the time.

Timeline: Bush Administration Responsibly Helping Families Stay In Their Homes

• In August 2007, President Bush launched a new initiative at HUD's Federal Housing Administration (FHA) called FHASecure to help hundreds of thousands of struggling homeowners - especially low-income families and minorities - avoid foreclosure. This product expanded FHA's ability to offer refinancing to homeowners who have good credit histories but cannot afford their mortgage payments after their teaser rates reset.
  
  
• In February 2008, President Bush requested $65 million for housing counseling in his Fiscal Year 2009 budget request. The Administration has increased funding for HUD's 2,300 approved housing counseling agencies by 150 percent since 2001. Fifty million dollars was approved for counselors in Fiscal Year 2008. Another $180 million went to the non-profit NeighborWorks this year to help them prevent foreclosures.
  
  
• In March 2008, as part of the bipartisan economic growth package, FHA temporarily increased its loan limits until the end of this year, enabling hundreds of thousands of more families to purchase or refinance their homes at an affordable price. The new temporary limits will range from $271,050 to $729,750.
  
  
• In March 2008, the Bush Administration proposed reforms to the Real Estate Settlement Procedures Act (RESPA) to help American homeowners better understand their mortgages and to allow them to shop for the best loan offer. Under this proposal, home buyers would be presented for the first-time ever with a standard form disclosing the important aspects of a loan. This new disclosure would ensure that home buyers are provided, early in the home buying process, complete, accurate and understandable information about their mortgages.
  
  
• In April 2008, the Bush Administration announced an expansion of FHASecure, which will start in July, to help homeowners with adjustable rate subprime mortgages who can no longer afford their mortgages and missed up to three monthly mortgage payments over the past 12 months. Rather than go into foreclosure, eligible borrowers can refinance with FHA and lenders can voluntarily write down the outstanding subprime mortgage principal balances.
  
  
• Starting in July 2008, FHA will expand FHASecure using a fair, flexible premium structure. This change, the first in FHA's 74-year history, will better protect FHA's solvency and ensure taxpayers do not assume the cost of this expansion by charging borrowers mortgage insurance premiums based on their credit risk.

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Action Alert: Join the Online Protest at GasPriceProtest.com

The average price of a gallon of gasoline is $3.95 this week, a
record high. It has nearly doubled in the past 18 months. Would
you be shocked to know that Washington, D.C. politicians are

behind much of the price spike?

We are all feeling more pain at the pump these days. Now it
is time to take action.

Bad policy from Congress is a major reason gasoline is going
through the roof. Led by Speaker Nancy Pelosi, Congress
continues to block development most of America's significant
reserves of oil and gas, instead vilifying "Big Oil" and scheming
up new tax increases.

By hamstringing American oil producers, Congress perversely
makes the world more profitable for Venezuela, Iran, and the
rest of OPEC. Already, a staggering 80 percent of the world's
oil supplies are now controlled by foreign governments and
government-owned firms. In fact, Exxon-Mobil, the largest
U.S. oil company, controls fewer oil reserves than the 14
largest government owned oil producers. Predictably, these
state-owned operations are increasingly inefficient and
backwards, resulting in declining productivity. But every
Congressional restriction makes America more dependent
on these sources of energy.

Congress also restricts refinery growth in the U.S., creating
another bottleneck in the supply chain. America hasn't
constructed a new refinery in over 30 years, thanks in part

to this red tape.

The question now is whether Congress responds by passing
more counterproductive ideas like "windfall profit taxes" on
American oil producers, or whether it will address the
fundamental supply and demand issues propelling much of
the price increase.

Like Ronald Reagan said during the 1980 energy crisis,
"America must get to work producing more energy. [Our]
program for solving economic problems is based on growth
and productivity…"

On that platform, Ronald Reagan was elected president,
whipped the energy crisis, and ended the oil shocks and
shortages that plagued America in the 1970s. Twenty-eight
years later, it's time to revisit Reagan's vision and get back
to work.

Tell the U.S. Congress
Make Gas Cheaper NOW by:

• Cutting gas taxes and banning earmarks
• Increasing American oil production
• Building and expanding U.S. refineries

With this debate in mind, FreedomWorks' newest campaign site,
GasPriceProtest.com is a call to action for substantial policy action
in Congress. Our petition is the limited government alternative to the
higher taxes and regulatory solutions being proposed by the Left.

Help us get this campaign started. Please visit the site, sign the petition,
and tell your friends about GasPriceProtest.com.

Sincerely,

Dick Armey

Chairman

FreedomWorks

© 2008 FreedomWorks. All Rights Reserved.

FreedomWorks
601 Pennsylvania Avenue NW
North Building, Suite 700
Washington, D.C. 20004

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Congress Should CAP the Interest Rate on past ARM's that lead to foreclosure!

Mortgage News Daily received an email this week from a reader with an intriguing idea for, if not solving, at least lessening the foreclosure crisis. What we loved about it was its simplicity.

The reader said that she works with a real estate attorney in Florida, one of the three states most heavily impacted by foreclosures. She said that her workload has shifted from helping her employer prepare and complete some 40 real estate closings a month to working with families facing foreclosure. She asks a very simple question:

"Has anyone ever suggested that we cap the interest rate on all those ARMs, regardless of the credit or income of the borrowers?"

The cost to the banks modifying these loans with the methods they are currently using, she says, has got to be astronomical. Consider the man hours necessary to answer the phones, gather the information the borrowers must provide and then reviewing these documents which appears to take at least 30-60 days. Now consider the cost and the effects of writing all borrowers that are 30 days delinquent that their original interest rate, whether 4 percent, 5 percent or even 6 percent and tell them that their original rate is now their current rate.

There have been several rate freezes proposed in the last 8 months, but most were so constrained by eligibility, time limits, and so forth as to be massively unhelpful.

There are a lot of holes in this idea, but at its heart there are components that might work. The problems?

First of all, the 30 days delinquent requirement almost guarantees that thousands of paid-to-date adjustable rate mortgages will immediately become 30 days delinquent, so scratch that part of her suggestion. Better to base eligibility on the date of the loan (when did teaser rates first kick in?) or the size of the contractual rate jump.

There would have to be a mandate from somebody - Congress, the Federal Reserve, Treasury, to fix those rates and the immediate objection is going to be that the government is interfering with the property rights of the lenders and/or investors who own the loans or that those investors will be reluctant to cooperate because it cuts their profit margin.

That ship has sailed.

Both because of the losses they are suffering and because lenders have been all too eager for the government to feel their pain - and do something about it - it is time to take definitive action that will solve the problems of more than a handful of borrowers, and solve those problems instantly.

Then there are those standing on the sidelines who will mightily resent borrowers getting any break in rates and terms. No matter that every foreclosure in their community is costing them in property values and probably tax revenue. Their refrain remains, "these people bought houses they couldn't afford; they don't deserve a bailout." It is time to get over what an earlier generation would call a "dog in the manager" attitude.

This suggestion is akin to a solution proposed by Congress in which the Federal Housing Administration would be empowered to guarantee loans that have been written down by the original lenders to reflect current home prices, but her plan could be implemented with no new bureaucracy and very little in the way of expense and manpower.

Congress's bill would require an appraisal of the property and does nothing to lessen the workload of the lender or servicing staff charged with collecting and reviewing the information which their bosses view as necessary to processing workouts or restructures. Worse, it would require a potentially catastrophic investment of federal money should FHA have to make good on substantial numbers of loan guarantees.

The idea requires willingness on the part of the lender/investor and a postage stamp.

One can imagine countless variations on the plan. The rate freeze/reversal could be temporary - perhaps limited to two years - or apply only to those whose new rate would be in excess of a given number - perhaps 7 percent. Borrowers might be offered a carrot - if they get caught up on their arrearage and then continue to pay on time under the new loan terms they might be put on an expedited list by the lender for a permanent workout, which the servicer could have the luxury of time to effectuate or to sell or refinance the house at today's relatively low rates without government assistance.

If lenders and servicers decide to continue on their present course of waiting for the government to bail them out or doing workouts according to their current formula, the number of foreclosures will continue to rise. And what is the cost of those foreclosures? It is probably a more staggering figure than you had thought. We will detail those expenses, not only to the lender but to the affected homeowner, local government, and the neighborhood in another article this week.

What do you think? Could a plan this simple work? Why or why not? Please share your thoughts below.

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