Well, the turmoil certainly continues in the non-conforming segment of mortgage lending. As mentioned last week, the non-conforming mortgage market is everything not sold to Fannie, Freddie or Ginnie. This would include the sub-prime market and many low or no documentation programs. Those programs are referred to as non-conforming loans. The conforming market, on the other hand, which is not in distress, consists of standard conventional mortgages, FHA and VA loans.

In the conforming market, it is business as usual. Funds are available and we are closing conforming loans daily. We could be closing more loans if Congress, specifically the Senate, would get off their duff, come back from vacation and get about the people’s business. Their first order of business should be to take up legislation modernizing the Federal Housing Administration’s home loan program. This legislation, strongly supported by the President and overwhelmingly approved last year and again this year by the House of Representatives, would bring the saving grace of low cost, fixed rate mortgage loans to thousands of Americans, including those currently struggling with sub-prime loans.

FHA loans have not kept pace with conventional mortgages insured with private mortgage insurance and have steadily lost market share in recent years to both conventional and sub-prime loans. The improvements needed are options for 100% financing, a sliding scale of mortgage insurance premiums based upon credit risk, and increasing maximum mortgage limits on all programs, including reverse mortgages, to match conventional conforming limits.

The Senate has a golden opportunity to show their support of those who had turned to sub-prime lenders as their only option and were saddled with sub-prime adjustable rate mortgage programs that they didn’t understand. Many of these homeowners were placed in programs that allowed their payments to increase significantly after a two or three year period of stable monthly payments.

“Foreclosures in the sub-prime market are on the rise and too many Americans are in the red. My bill will give low- and moderate-income borrowers a safer alternative to the kinds of sub-prime loans that quickly go south,” said U.S. Rep. Judy Biggert, R-Ill., who re-introduced the bill this year in the House,

In addition to the improvements listed above, any legislation should also permit more mortgage brokers to be able to offer FHA loans to their customers. Current FHA restrictions require mortgage brokers to submit audited financial statements annually. Since most mortgage brokers are small businesses, this poses an undue financial hardship on a segment of the industry that generates more than half of all mortgages made in the country today. The cost of a standard audit for a small mortgage broker is in the range of $5,000 or more. This annual expense keeps many mortgage brokers from being able to offer FHA loans to their customers. Had more mortgage brokers been able to offer FHA financing, those customers previously placed in higher rate sub-prime mortgages could have been provided stable FHA loans instead.

A proposed alternative to FHA’s audit requirement would be to require that mortgage brokers have and maintain a surety bond of a suitable amount, payable to FHA should something go awry. The Georgia Department of Banking and Finance currently requires licensed mortgage brokers to have and maintain a surety bond or letter of credit in the amount of $50,000 payable to the Department. The annual cost of such a surety bond is in the neighborhood of $350. This would be a much more bearable cost to a small business owner and would allow many additional prospective homeowners to be offered low cost, low rate FHA financing.

Please join me in asking our Georgia Senators, Saxby Chambliss and Johnny Isakson, to support FHA reform and work to have it quickly passed in the Senate and presented to the President for his certain approval. You can get in touch with our Senators by logging onto senate.gov.

David Griffin has been financing homes in Macon, Warner Robins and all of Middle Georgia since 1983. He is a two-time past president of the Mortgage Bankers Association of Middle Georgia. For an archive of past articles visit www.davidjgriffin.com.