FHA’s Could Help its Bottom Line And Help Homeowners in Forclosure At The Same TIme

Today’s New York Times reports that the Federal Home Administration may need an infusion of cash as its reserves have been decimated by the spike in mortgage defaults.  One way to save FHA money would be for the agency to intervene in foreclosure actions against insured homeowners. Government Attorneys would be in a great position to negotiate loan modifications that could save the agency millions if not billions nationwide.

If a FHA insured mortgage is foreclosed the federal government agency is required to make the mortgage lender whole for their loss including inflated collection and foreclosure costs.   Engaging with homeowners and lenders prior to foreclosure would take away this perverse incentive for lenders and loan services to march to foreclosure when a possible reduction in principal on the mortgage could keep homeowners in their homes, allow lenders to keep a paying customer  and save FHA tens of thousands of dollars per house. (see earlier post)

If the FHA doesn’t act, Congress should.

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Posted in Forclosure, Predatory Lending, Uncategorized

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