| Adjustable rate mortgages (ARM) once seemed like a | | | | money; it comes from a lender willing to work with |
| good idea. Those days are over. When interest rates | | | | borrowers. Since the government qualifies the |
| were low, homeowners were reaping the benefits. | | | | borrower themselves, the odds of getting the loan are |
| Then the rates rose quickly and owners found | | | | very good. |
| themselves facing payments that they weren't | | | | Borrowers can feel secure in obtaining the loan since |
| financially prepared to repay. | | | | these companies are not fraudulent or scams in |
| Government Intervention | | | | disguise. These are honest loans. |
| As the crisis unfolded, the foreclosure lists began to | | | | FHA Qualifications |
| grow. Borrowers were expected to pay monthly | | | | To obtain an FHA loan the borrower must already |
| mortgage bills that were double or triple previous | | | | have an adjustable rate loan. The payment history |
| payments. The mortgage payments became | | | | needs to be spotless prior to the ARM jump. |
| impossible for owners to meet. They fell behind and | | | | Additionally, the borrower must prove that they have |
| foreclosures increased. | | | | the income to cover the new payment. Sometimes, |
| The federal government opted to step in to help curb | | | | the government requires the borrower to have at least |
| the growing trend because interest rates were | | | | 3% equity on hand. |
| considered an unpredictable problem. It wasn't | | | | Normally refinancing is impossible for those with bad |
| completely the borrower's fault they fell behind. | | | | credit ratings. Since this is a government program, the |
| During this period, refinancing became impossible to | | | | qualifications are different. For example, bills that have |
| obtain. The government offered a program so | | | | been paid on time are weighed more than a good |
| borrowers could qualify for refinancing to take hold of | | | | credit score. |
| out-of-control payments. | | | | FHA loans are not intended for everyone facing |
| FHA Loan | | | | foreclosure. They were designed to help those caught |
| The Federal Housing Administration (FHA) offers the | | | | in the ARM trap. |
| FHA Secure Refinance Program to borrowers with | | | | Government assistance isn't supposed to be a |
| ARM loans. Homeowners can be guaranteed a fixed | | | | permanent solution. It is meant to be a one-time fix for |
| rate loan to replace their current ARM. This is designed | | | | borrowers struck hard by the abrupt interest rate rise. |
| to bring the monthly payments down to a manageable | | | | It is simply transferring a debt into a more manageable |
| amount. | | | | form. The borrower, however, still needs to build a |
| FHA obtains the loans from reputable lenders that they | | | | longer-term plan to pay off the debt cleared. |
| work with. So the borrower is not receiving taxpayer | | | | |