Over the last few years, the fed has remained very accommodative with the rates set to encourage lending. New steps are being considered to help homeowners rise above their sinking mortgage, such as principle reduction programs. The senate is also working on a bill for the FHA, which would require them to hold more money in reserve to avoid taxpayer support. The floor being laid must be clear and secure to make this a reality.
The FHA came into play in 1934, when the housing market was in need of recovery. This was during a period when there were more renters than home owners and mortgage terms were out of reach for first time buyers. There may be some regrets in their structure, as their reserve account became non-existent when the housing bubble burst.
The FHA getting another chance means less people will qualify with a tighter structuring in place for home loans. Some changes that are being proposed include an increase in the down payment requirement for non-first time homebuyers as well as an increase in the premium cap charged to the borrower. Lenders are responsible for more than a magician’s assistant; mistakes by an underwriter could place the responsibility on the lender when a loss occurs. (Hopkins, 2013)
The principle reduction plan makes the homeowners the paid spectators, as they appear to be nothing more than innocent bystanders in a pool of underwater mortgages. The plan for less foreclosures can only be established if the homeowners’ see that they must pay now, and keep paying. A benefit to the principle reduction plan is more money in homeowners’ pockets. This will hopefully lead to a future consisting of more than a clear plexiglass with paid spectators. Once we learn how to walk on water, our economy will get back on track.
Housing Recovery Federal Reserve Chairman Ben Bernanke . (2012, June 10).
Hopkins, C. B. (2013, 07 12). U.S. Senate FHA Solvency Measure Would Require Premium Increases. Retrieved 07 17, 2013, from Bloomberg: http://www.bloomberg.com/news/2013-07-12/u-s-senate-fha-solvency-measure-would-require-premium-increases.html