As expected, the Department of Housing and Urban Development said it will shut down the FHASecure program Wednesday, despite pleas from industry and consumer advocates to keep it going.
Federal Housing Commissioner Brian Montgomery wrote in a letter to lenders dated Dec. 19 that "maintaining the program past the original termination date" of Dec. 31 "would have a negative financial impact" on the Federal Housing Administration's mortgage insurance fund.
Such a cost "would have to be offset by either substantial across-the-board single-family program premium increases or the suspension of FHA's single-family insurance programs altogether."
Under FHASecure, the agency insured refinancings for borrowers who were delinquent on their mortgages. In his letter, Mr. Montgomery wrote that the Hope for Homeowners program is available to help such borrowers.
Last month several trade groups and the Center for Responsible Lending, which has often criticized industry practices, sent HUD a joint letter urging that FHASecure be extended "through at least 2009."
Hope for Homeowners, created by legislation enacted this year, "cannot … serve as a replacement for the FHASecure system," the groups' letter said. "FHASecure is a much more accommodating product," because, among other things, "the design of the FHASecure program is not set in statute and therefore permits the program to adequately adapt to market evolutions."
National Mortgage News, a SourceMedia Inc. publication, reported this month that HUD was expected to pull the plug on FHASecure.