HUD Kills FHASecure

Updating an earlier report on HousingWire, the U.S. Department of Housing and Urban Development has issued a formal letter confirming its termination of the FHASecure troubled borrower refinancing program. The mortgagee letter, 2008-41, confirms that the program will be terminated on Dec. 31. “Maintaining the program past the original termination date would have a negative financial impact on the MMI Fund that would have to be offset by either substantial across-the-board single family program premium increases or the suspension of FHA’s single family insurance programs altogether,” the letter reads in part. Effective Dec. 31, FHA said it will not issue any new case numbers for lenders looking to refinance borrowers into FHASecure loans; HUD will honor any loans for which a lender has taken an application and requested a case number prior to Dec. 31, it said. When FHASecure was launched in late Aug. of 2007, administration officials suggested at the time that the program could help 240,000 delinquent subprime mortgage holders avoid foreclosure. But by December of last year, four months after its introduction, the program had only endorsed 266 loans for borrowers that were delinquent at the time of refinancing, forcing HUD officials to redefine the program with a wider net for any at-risk borrower, delinquent or not. HUD officials have maintained steadfastly to the press that such a focus was always the intent of FHASecure. Regardless, the program never seemed to gain much traction with key Democratic lawmakers, who pushed to create the Hope for Homeowners program that went into effect the past October. Part of that was because the Bush administration attempted to leverage FHASecure as a bargaining chip during negotiations over the Emergency Economic Stabilization Act of 2008, suggesting that the program could handle at-risk and underwater borrowers without the need for a $300 billion expansion to the FHA program under the H4H proposal. While Congress was haggling over the housing bailout package, the Bush administration unveiled an expansion of the FHASecure program designed to make it easier for underwater borrowers to participate, in an effort to make the H4H proposal superfluous. Assistant secretary for housing Brian Montgomery said the revised program would help “hundred of thousands of borrowers” at a hearing of the House Financial Services Committee on April 9; the official estimate at HUD was that 500,000 additional borrowers would be helped by insuring refinanced mortgages for borrowers who were up to 90 days delinquent, or those who receive a voluntary mortgage principal write-down from their lender. On May 19, HUD officials again touted the program, suggesting that the Hope for Homeowners program likely wasn’t needed to help at-risk homeowners. Now that the H4H program has become the de-facto legislative focus for government-led refinancing of troubled mortgages — a program with its own hurdles, too, it should be noted — it’s clear that HUD officials had little interest in maintaining two similar programs. Read Mortgagee Letter 2008-41. Write to Paul Jackson at

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