The FHA Short Refinance program for underwater borrowers was initially announced with some fanfare, and an allocation of up to $14 Billion in TARP funding, in March of this year. (The TARP allocation has been reduced to $10.8 Billion, according to accounting in the latest Special TARP IG Quarterly Report).
(HUD announced the formal start of the program in early September with August HUD PR HERE; PR when the program was first announced in March is HERE).
FHA Outlook reports for September and October available HERE show a total of 35 applications for the FHA Short Refinance program had been received.
Recent policy guidance from Ginnie Mae HERE would allow FHA Short Refinance loans to be included in Ginnie Mae pools, but the program requirement for a investor principal reduction is the reason that I long ago said this program seemed likely to under perform.
If Congress and the Administration are looking at ways of reducing the budget deficit it would certainly appear that a significant portion of the TARP allocation for this program MAY be subject to recapture as it seems highly likely that this program will be under utilized.
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