FHA Secure – a kind of bailout plan for prime borrowers?

Late last week, President Bush unveiled a new FHA program, called FHA Secure – a plan that is supposed to help troubled borrowers. The proposal, however, received much criticism immediately, because of its narrow scope and stringent requirements for borrowers. The program will secure loans for borrowers who own adjustable-rate mortgages and want to refinance into a loan with better terms. To qualify, borrowers will have to prove they’ve made their monthly payments regularly until the interest rate reset, (or if it hasn’t reset yet, that they’re current with their payments) and have at least 3% of equity in their homes. The maximum loan amount the FHA will guarantee is $202,000, or $362,000 in high-cost states, which makes the program quite useless for many consumers. The number of loans in the program is limited, too, so the entire thing will only help a fraction of the homeowners facing foreclosure on their homes. According to analysts, up to 3 million households might lose their homes in 2007-2008 due to rising mortgage interest rates.