quote:

---

Originally posted by U812

So what are your feelings regarding this form of Government Sanctioned Equity Stripping.

I personally think it goes way to far. 50% even after 5 years! I wonder if the Vaseline is included in the ridiculous UFMIP (3%) and Monthly MIP (1.5% per year).

FIVE-YEAR PHASE-IN FOR EQUITY AS A RESULT OF SALE OR REFINANCING.—For each eligible mortgage insured under this section, the Secretary and the mortgagor of such mortgage shall,upon any sale or disposition of the property to which such mortgage relates, or upon the subsequent refinancing of such mortgage, be entitled to the following with respect to any equity created as a direct result of such sale or refinancing:

See Page 410 of this link http://www.rules.house.gov/110/text/110_atostohto3221.pdf
for the breakdown.

---

quote:

---

You have no problem with a 50%, at a minimum, prepayment penalty. It's ridiculous, period. Talk about PREDATORY Lending!

If the loan is so abhorrently risky, DON'T DO IT!

Let's see, on a $250,000.00 loan in the 1st year FHA would receive $11,250.00. Then onward each year another 1.5%, in this case $3,750.00 until the borrower reaches 78%, which would take approximately 157 monthly payments. So, for another 12 years they will collect approximately $45,000.00 in monthly MI. Now let's say at that time the borrowers decided to sell their property and there is $90,000.00 worth of equity. It would then be split with FHA/Gov. at 50/50 resulting in a total collection by FHA of $101,250.00. Simply egregious. This doesn't even take into account the run up in the rate for this product.

---

quote:

---

Originally posted by Mandyvilla

From what I can tell, it's designed to be an agreement between the noteholder and the borrower. I am trying to understand the indignation on the Equity Stripping. Again, before I start challenging anything, I tend to get a handle on what I am slamming.

I am backing up files while I am on this site today, so heavy reading (a 700 page document) is out for right now. But I want to make sure I understand your post above:

quote:

---

I haven't read the entire document myself, I was skimming thru it when I came across this and thought it a bit out of line if I undersood it correctly. Once you do a quick analysis it appears to be quite ugly.

You have no problem with a 50%, at a minimum, prepayment penalty. It's ridiculous, period. Talk about PREDATORY Lending!

If the loan is so abhorrently risky, DON'T DO IT!

Let's see, on a $250,000.00 loan in the 1st year FHA would receive $11,250.00. Then onward each year another 1.5%, in this case $3,750.00 until the borrower reaches 78%, which would take approximately 157 monthly payments. So, for another 12 years they will collect approximately $45,000.00 in monthly MI. Now let's say at that time the borrowers decided to sell their property and there is $90,000.00 worth of equity. It would then be split with FHA/Gov. at 50/50 resulting in a total collection by FHA of $101,250.00. Simply egregious. This doesn't even take into account the run up in the rate for this product.

---

Is the $11,250 the Upfront MIP (lender pays 3% and the borrower 1.5%)?

This is the total for the 3% Up Front Funding Fee + the 1.5% monthly MI for the 1st year of the loan.

and

The 1.5% or $3750, the monthly MIP? Yes

and $45,000, the result of 157 months of MIP? Yes

From where I stand, it appears to be an FHA loan where the negative equity is set aside and possibly paid back in the future upon the sale of the home. Wrong? What am I missing?

If I understood it all correctly it's for ANY refi that would fit the requirement for the loan and is NOT limited to a FHA Refi. So, if someone were upside down in an Adjusting 2/28 ARM with WAMU,who had issues with jacking appraisals that resulted in a Major Investigation ending ultimately in another idotic agreement governing appraisals, and WAMU agrees to take a short payoff of $20K it's tough luck for WAMU, because the legislation says they would have to entirely release their interest in the property for the REFI to happen, thus filling the coffers for FHA with these NEW guidelines Fee's.

I see no burden to taxpayers, nor is it mandatory. Haven't read the entire bill so I can't comment on the Taxpayer implications although I do believe that I seen references to increased funding for other things incorporated in the bill.

New payment is based on revised value. Yes Again, 100% voluntary and obviously not going to help the masses. You don't throw someone a lifeline and then put a rediculous condition before them in order for you to pull them to safety.

U812, what do you think is the answer? Not Certain!

It's a very complicated issue, and I feel Mortgage Brokers could play a very important roll in hammering out a reasonable solution. It'll take much constructive debate with the goal of helping ALL involved. Not just the Broker, Lenders, Borrowers, Government, etc.... Also, it's not something that is going to be worked out in a matter of a couple of days. There are many complex issues, from contract law to property rights that have to be brought into the equations and discussed by those willing to actully put the brain power into once again forming a more perfect Union.

Now I will say, if this is the same lender doing the Refi and taking a loss to do it, I could see an agreement entitling that lender to recapture their previous loss.

---

quote:

---

Originally posted by mganovsky

From what I read the Federal Reserve is going to give FHA an additional 300 Billion to fund this. Where do you think the 300 Billion is comming from, maybe Bernanke is writting a personal check.

The share in future equity is to pay back the tax dollars that are being used.

The benefits of this new law far out weigh the negatives.

---