New American Funding Says Hope for Homeowners Program Needs Change

tag: hope for homeowners

Due to current rising default rates, the banks simply do not want the added workload, risk and upfront cost associated with borrowers that have displayed a pattern of not paying their mortgage, regardless of the reason, Arvielo says. Even though a borrower's "loan" amount is ultimately guaranteed by Fannie, Freddie or FHA, the responsibility for the payment collections falls squarely on these major banks. 

Can you blame them? 

"Arvielo says he was very frustrated when Hope for Homeowners was introduced. New American Funding was anxiously anticipating a windfall of business opportunity when the guidelines were first released, but when Arvielo called his contacts at all of the large institutional lenders -- on which all mortgage banks rely to sell loans -- he was met with zero interest in cooperating with the program. 

"Out of frustration, I went toe-to-toe with one of the major investors at the Mortgage Bankers meeting in San Francisco, where I even brought up the fact that they had just received billions in TARP money and weren't going to use any of it for the Hope for Homeowners program when this gentleman said something to me that stopped me in my tracks," Arvielo says. "He said, 'If we would agree to buy these loans from you, where you are on the hook for the borrowers' first four payments, the typical timeframe for a mortgage bank, or you would have to buy the loan back…what would you do?' Admittedly, I am no longer an advocate for the program." 

 Arvielo says the next time money and time is spent creating a program to help homeowners, the government needs to apply a little discovery to the systemics of actually originating and funding loans. The government might also do well to get the major banks to "sign off" on the program and agree to some level of support, Arvielo says. 

 "The Hope for Homeowners program should have included a 'First payment default' guarantee and money earmarked for the servicing of these loans. Then, it might have had a chance," Arvielo says. 

For more information on New American Funding or president Rick Arvielo's position on the Hope for Homeowners program.