Center for Responsible Lending and Industry Groups urge HUD to Extend An Existing Option to Help Alleviate Current Crisis


Center for Responsible Lending
November 20, 2008

CRL has signed a joint letter with the American Bankers Association and other industry trade associations asking the Department of Housing and Urban Development to continue the FHASecure program at least through the end of next year. Extending the program, which otherwise will sunset in December of this year, is one of several vital steps federal officials and lawmakers must take to keep millions of families in their homes, and, in the process, stem the wave of foreclosures that are at the root of the country's economic crisis.  A full copy of the letter follows.


American Bankers Association
American Financial Services Association
Center for Responsible Lending
Consumer Bankers Association
Consumer Mortgage Coalition
Housing Policy Council
Mortgage Bankers Association

 

November 19, 2008

 

The Honorable Steve Preston
Secretary
U.S. Department of Housing and Urban Development
451 Seventh Street, S.W.
Washington, D.C.  20410

The Honorable Jim Nussle
Director
Office of Management and Budget
Eisenhower Executive Office Building
Washington, D.C. 20503

Re:  The Importance of Continuing FHASecure

The undersigned organizations are joining in this letter to express full and united support for the continuation of the FHASecure program.  Our economic system is enveloped in an unprecedented crisis with poorly functioning capital markets and a growing number of troubled borrowers in need of immediate help.  It is a difficult situation, and all involved, including the Department of Housing and Urban Development (HUD), are struggling to find every reasonable option.

The FHASecure program has proven to be an effective and critically important tool to assist distressed homeowners.  Its current sunset date, December 31, 2008, is too early, as there are, and will continue to be, substantial numbers of distressed borrowers with insufficient other options to retain their homes.  We urge the extension of FHASecure so it can continue, without disruption, through at least 2009.  FHASecure cannot do the job alone, of course; other loan modification programs are urgently needed.  But keeping this program available is of extreme benefit to borrowers and lenders alike.  We ask that HUD use its authority to extend this program to ensure that FHASecure, and FHA-insured loan refinancing, be preserved as viable choices for delinquent and troubled borrowers.

We are grateful to HUD's staff for achieving the extraordinary goal of implementing the Hope for Homeowners program (H4H) with such efficiency and in such abbreviated time schedules.  Although it is a very new and still evolving program, we hope it will become a positive loss mitigation tool.  The H4H program cannot, however, serve as a replacement for the FHASecure system.  These two programs were created to address rather distinct consumer needs, and they differ in the form of assistance that they provide to homeowners.  In a number of ways, FHASecure is a much more accommodating product, and is proving to be of great value in resolving homeowners' needs in a wide array of situations. For example, one of the difficulties in trying to assist struggling borrowers is the fact that the loan investors in many cases are resistant to permit loan modifications that may be beneficial to borrowers.  Even when investors may be agreeable to modifications, loans may be securitized in such a complex manner that the operational difficulties of obtaining investor approval present a high hurdle to overcome.  FHASecure is a refinance program, not a loan modification program, thereby sidestepping these loan modification difficulties. 

Additionally, FHASecure is a program designed to help families at more moderate income levels.  These are the families who most need assistance. Most importantly, the design of the FHASecure program is not set in statute and therefore permits the program to adequately adapt to market evolutions.  In short, FHASecure's added flexibility is a key strength during these unpredictable times of elevated delinquencies.

Without doubt, the current crisis has caused a significant decrease in the availability of loan options, along with increasing lending standards throughout all credit markets.  In light of all the challenges, banks and mortgage lenders need all possible tools to be successful in these extremely challenging times.  We urge the Secretary to extend the FHASecure program for another full year, and we ask that this be done immediately so as to avoid program lapses.  The expanded loan options offered by FHASecure are an essential component of our collective efforts to help the largest possible numbers of at-risk borrowers.

This is not the appropriate time to permit the lapse of a viable mortgage refinance option.

Sincerely,

American Bankers Association
American Financial Services Association
Center for Responsible Lending
Consumer Bankers Association
Consumer Mortgage Coalition
Housing Policy Council
Mortgage Bankers Association

For more information: Kathleen Day at (202) 349-1871 or kathleen.day@responsiblelending.org; Chris Kukla at (919) 313-8520 or chris.kukla@responsiblelending.org; or Ginna Green at (510) 379-5513 or ginna.green@responsiblelending.org.

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About the Center for Responsible Lending

The Center for Responsible Lending is a nonprofit, nonpartisan research and policy organization dedicated to protecting homeownership and family wealth by working to eliminate abusive financial practices. CRL is affiliated with Self-Help, one of the nation's largest community development financial institutions.