FHA Official says Lenders Need to Write Down Principal on Loans

NewImage.jpgThe Obama administration plans to ratchet up pressure on mortgage lenders to write down principal for borrowers who are underwater on their homes according to Dow Jones.

”In my view we need to push hard on the industry. Servicers and investors have got to begin writing down principal,” said David Stevens, Federal Housing Administration Commissioner during an event organized by Women in Housing and Finance.

FHA released a short refinance program last month that allows underwater homeowners who are current on their loans to qualify for an FHA insured loan if lenders are willing to write off 10% of the unpaid principal balance of the first mortgage.

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”We are concerned in the administration that this is probably the next critical element in getting the housing market stabilized–this issue around negative equity,” Stevens said.

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  • When is the administration going to get that helping ONLY the people that are underwater on their mortgages isn’t going to solve the problem. Institute the “Great Mortgage Reset” — whereby ALL mortgage rates are set at something like 1, 2, 3%. This will free up money for ALL homeowners — some of which will surely be saved, but much of which will be pumped back into the economy.

    • osamotj,

      Interesting. What a great idea except who will pay for it?

      Let’s see either we will bankrupt the federal government paying the costs or ruin the MBS market forever.

      Who is it that you want to pay for this really great idea? How about the borrowers who will benefit? Oh yeah, we can’t do that since they are the ones who will be robbing the others.

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