A housing solution no one wants to hearJoe AdamaitisFHA, bailout, massive inventories, foreclosures, Senate Banking Committee, Fannie Mae, Freddie Mac
Disclaimer: The views expressed and written in this article
are those of the author alone and do not necessarily represent the
views of The Mortgage Press, the National Association of
Mortgage Brokers and NAMBs state affiliates.
Like many, I'm not happy about the current bailout plan in place
(or whatever label they put on it), but recognize the gravity of
the situation. I'll tell you upfront that I'm not an economist,
politician or some rocket scientist simply annoyed and therefore
floating new ideas out there. I'm a mortgage banker who has
corresponded with everyone from Rep. Barney Frank to Chairman of
the Federal Deposit Insurance Corporation Sheila Bair in an attempt
to provide an alternative to spending billions of our taxpayer
money. I will tell you that except for Sen. John Sununu's office, I
received the customary form letter thanking me, with explanations
of why we need to spend billions.
To keep this simple and leave my opinions at the door, my
recommendation is to simply utilize a program that has been around
for as long as the Federal Housing
Administration (FHA) has been in existence. The plain and
simple answer is to provide people access to the "assumable
mortgage" program which FHA has offered for years.
Many in the business understand that this is nothing more than
allowing qualified buyers or borrowers to take over or assume the
mortgage of a seller or homeowner who is unable to continue making
payments, or who finds a "qualified" buyer/borrower capable of
stepping in to take over the mortgage on a home they wish to sell.
Plain and simple, it is a way for the seller to save their credit
(which is our next big crisis) and for a qualified buyer to obtain
a mortgage by paying substantially less in financing costs.
The solution may not be the end all cure to our current crisis,
but it may stem the tide of massive inventories, foreclosures,
spiraling prices and people just walking away, leaving entire
As many people know, especially those in charge of the Senate
Banking Committee, the FHA has long allowed "qualified" buyers to
assume a seller's mortgage. My solution is to take this same
program and allow it to be used for all mortgages.
While I don't pretend to have all the answers, this program
could work by quickly changing the Fannie Mae and Freddie Mac guidelines to
allow their toxic loans to become assumable. Of course, there will
be issues and logistics, and those who oppose the idea, which I
would aggressively respond to with: "Wouldn't it be more prudent to
fund a program that puts qualified buyers in homes and replenishes
cash flows, while simultaneously reducing inventory in large
Wouldn't it be best to allow American citizens to assume
mortgages versus funding the buyout of these loans, which then must
be sold off yet by another taxpayer-funded government entity? Has
anyone noticed how fast you can put a short sale together?
Certainly people in my industry won't like the idea, as we will
not be paid for putting people into an assumable mortgage. However,
the mortgage and real estate industry will be crucial to helping
facilitate the many transactions that may fit into this solution.
Their combined knowledge and services will be necessary, and
therefore some form of compensation could be made available.
Lastly, let's consider the many advantages this program could
provide. First and foremost, we begin with billions being saved in
taxpayer monies. Next, there would be substantial savings to
qualified borrowers, including no downpayments. Lastly, consider
the effect the program could have on reviving neighborhoods
suffering from vacant homes, which in turn, hopefully provides the
stabilization of prices, bringing us to that critical point known
as "the bottom."
I'm sure I've opened myself up for criticism, but if getting
folks to think outside the box can get us back on track quickly
without spending $350 to $700 billion, it's worth the effort. I'm
just a guy watching from the sidelines like many Americans, and I
believe we need to consider the potential of this or any program as
an alternative to simply feeding cash to all that ails us. Global
demand will remain, and I'm sure billions will go to halt the
economic slide we face. But perhaps we can do this a lot cheaper,
while at the same time, helping buyers and sellers. It is just an
Joe Adamaitis is a home mortgage consultant for Wells Fargo Home Mortgage. He
may be reached at (941) 363-5009 or e-mail [email protected]