HUD/FHA Now Projecting 96,875 Loans for Short Refinance Program; No Way Do I See That Happening.

HUD has filed a new information collection request related to the FHA Short Refinance program with the Office of Management and Budget HERE. 

Buried within an associated document HERE is some additional background on the paperwork requirements for lenders under that program. (File is in MS Word 2007/2010 format).

Notably this form indicates that:

1. HUD/FHA expects 96,875 loans applications annually , with several form types submitted for each loan.
2. HUD says that the program expires September 30, 2011.
3. HUD says that that debt to income ratios can be up to 38%/50% for Loan to Values less than 90%

If projected TARP subsidy for the FHA short refinance program is $8.1 Billion that would mean that per loan subsidy cost for these 96,875 loans would be $83,691, a highly unlikely per loan subsidy amount. (Subsidy amounts per loan would actually be higher since not every application results in an actual loan).

With volume during the first two months at 35 loans (my prior post HERE) it also seems likely that far FEWER than 96,800 FHA additional short refinance loans will be insured in the 11 months from November 2010 to September 2011.  

Actual Volume , Less than 1% of Prior Projection?

My prior Sept 2010 post HERE shows WSJ story had data projecting nearly 11 million underwater borrowers, so the actual likely production under this program will clearly have very little impact AND could be less than 1% (5,000-15,000 loans) of the "500,000 and 1.5 million " range projection previously made by administration officials.

With likely loan volume under the FHA short refinance falling far short of Administration projections it continues to appear that a significant portion of the projected $8.1 billion in TARP subsidy could be recaptured. (Wouldn't it make sense to use this money for the still unfunded Housing Trust fund for example)? 

Originally created and posted on the Oregon Housing Blog.