Hot finance topics

A wave of foreclosures could be prevented if the largest federal home-ownership program were open to more delinquent borrowers, according to a study being mulled by the nation’s largest mortgage investor group.

The study circulated within the American Securitization Forum and obtained by Reuters says more than 600,000 troubled homeowners could win new mortgage terms after easing terms of the Federal Housing Administration.

Specifically, the document suggests the FHA loosen its ‘FHA Secure’ program to aid not just adjustable-rate mortgage holders but borrowers with fixed rates and those who have shown an ability to make steady payments even if they have become severely delinquent in recent months.

FHA was created during the Great Depression to help high-risk or low-income borrowers win better loan terms by insuring mortgage payments, but policymakers have lately seen its potential to help today’s troubled subprime borrowers.

In late August, the White House announced that borrowers who have missed payments since their interest rate has climbed could qualify for refinancing under the FHA Secure program but the effect of that effort has been limited so far.

The new plan was conceived by an American Securitization Forum member and the group’s staff believe it “merits serious consideration” as a way to prevent more fallout from the U.S faxless payday loans. subprime mortgage crisis, the memo said. It would open FHA Secure to borrowers who became delinquent for any reason and who made any six monthly payments since the loan was originated and three timely payments after the rate adjustment.

The current FHA Secure program is only poised to help around 44,000 subprime borrowers, or 5 percent of those who are more than two months behind in their payments, according to a study circulated by the American Securitization Forum.

The new guidelines would reach 607,000 subprime borrowers, or 68 percent of those who are severely delinquent, it said. 

Read more