Plenty of people have heard me say that the Bush Administration has never introduced a program, policy or plan that I didn't passionately dislike. But at last, that perfect record of bad ideas has been shattered by, of all things, a Federal Housing Administration loan program.
The proposed FHA Secure loans, which are intended to help some 80,000 homeowners escape from burdensome adjustable-rate mortgages, have a lot of smart elements: Borrowers must have a history of on-time payments and sustained employment, 3% cash or equity, an interest rate reset from June 2005 to December 2009 and most importantly sufficient income to make the new payments. The loan cap, currently $362,790, should be raised, as also has been proposed, to $417,030, the current conforming loan limit at Fannie Mae and Freddie Mac. FHA mortgage insurance may be required.
Now that's smart underwriting: If only federal regulators had imposed those rules on lenders all along, this whole mess--and a lot of heartache--might have been avoided.