Despite President Bush’s major proposal to aid homeowners who took out risky subprime mortgages, some in the media already don’t think that’s enough.
“[I] don’t know how big of a helping hand it was when you’re talking about two million homeowners who are facing adjustable rate mortgages resetting over the next couple of years,” said real estate reporter Diana Olick on the August 31 CNBC’s “The Call.” “Now the only thing he actually said in his speech that would have a real effect today is that FHA [Federal Housing Administration] change in the program. And remember, FHA can only back mortgages up to about $362,000, so there’s your limitation right there on those type of loans.”
The new program Olick referred to is the FHASecure plan, according to a Housing and Urban Development press release [1]. Under the plan, the “FHA will allow families with strong credit histories who had been making timely mortgage payments before their loans reset-but are now in default-to qualify for refinancing.”
Nonetheless, the move is still historic [2] as Noelle Knox pointed out in the August 31 issue of USA Today. It represents an expansion of the role of the FHA – from a government bureaucracy that has traditionally helped low- and moderate-income families and first-time home buyers to one helping delinquent borrowers. Yet, Olick pointed out those who irresponsibly bought a home with a subprime mortgage aren’t getting government help.
“Now for the people he can help, the administration is saying itself that it is only for credit-worthy borrowers. Now remember, a subprime borrower is defined as a person who has little to no credit, so it’s questionable in this, ahh – speech how much subprime borrowers are really going to fall into this new program.
Although the plan can only help borrowers with mortgages up to $362,000, according to the National Association of Realtors [3], the median home price in the
But still, the government’s act of rescuing borrowers from mortgage terms they agreed to was downplayed by Olick.
“The FHA program is essentially just a new loan product that the FHA is working with lenders to offer to people to refinance out of these risky loans and get into a better loan for them that’s not quite as expensive, that they can afford and that is FHA backed.”
This is the latest example of the media encouraging government to try to iron out wrinkles in the home lending crisis, rather than letting the marketplace work the kinks out. On August 25, CNN’s “Your $$$$” encouraged more government regulation [4] in the home lending marketplace. Even liberal Democratic presidential hopeful Barack Obama has jumped on board, calling for government to penalize lenders [5] they deemed irresponsible.