It looks like the brunt of the foreclosure problems in our country will rest on the shoulder of the Federal Housing Administration - FHA.
All the key players in the housing and mortgage crisis plus the democratic presidential candidates have all agreed that there will be no new agency created to deal with the national foreclosure crisis.
House financial services chairman Barney Frank is putting together legislation that would authorize up to $300 billion in special funds to cover potential losses on FHA financings of loans to people with the most serious delinquency situations. Under Franks’ plan , FHA would acquire distressed mortgages where the sellers would have to agree to substantial write-downs of principal balances.
Congress is looking to revive a version of the Depression-era Home Owners Loan Corporation, which bought up hundreds of thousands of delinquent mortgages and replaced them with more affordable government-backed loans.
The Home Owners’ Loan Corporation (HOLC) or Home Owner’s Refinancing Act, was a New Deal agency established in 1933 under President Franklin D. Roosevelt. Its purpose was to refinance homes to prevent foreclosure. It was used to extend loans from shorter loans to fully amortized, longer term loans (typically 20-25 years). Through its work it granted long term mortgages to over a million people facing the loss of their homes.
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I think that at the end of the day, we are going to have to let the chips fall where they may… We can’t save everyone who can’t afford to make their payments.