The New York Times rambles, and mangles mortgages along the way

The New York Times rambles, and mangles mortgages along the way

Mortgage finance and mortgage regulation aren’t the paper’s strong suits

WATCH: Trulia stages haunted house for unsuspecting homebuyers

'Tis the season. For screaming.

10 reasons why people don’t get a mortgage

It’s not just because of finances
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FHA's Home Rehab Program Spikes in 2009

A Federal Housing Administration (FHA) program for purchase loans on foreclosures or other properties in need of rehabilitation gained in popularity in 2009. As of June 2009, the volume of new loans covered by the FHA 203(k) Home Rehabilitation Mortgage Insurance Program nearly doubled the amount from all of last year, according to a report Thursday from the Office of the Comptroller of the Currency (OCC). Congress established the 203(k) loan program in 1978 to help borrowers gain and rehabilitate single-family properties. It allows FHA-insured financing for structures with up to four dwelling units in need of repair, but the owner must occupy the subject property or it can be owned by eligible nonprofits or government agencies. Usually, borrowers looking to rehabilitate properties must obtain a short-term financing loan to purchase the home, another short-term loan to cover rehabilitation costs and third permanent financing to pay off the first two. The 203(k) loan condenses the rehabilitation financing process by allowing a borrower to take out one loan to cover costs rather than the three separate loans. “The 203(k) Program is an important tool that can help mitigate a lender’s risk, while at the same time restore some of the nation’s foreclosed properties and help stabilize neighborhoods,” said Comptroller of the Currency John Dugan in a release. As of June 2009, real estate data provider Realty Trac saw 2m foreclosure houses on the market, according to the OCC's report. And, with many of these foreclosures in need of repair, the report indicates significant room for use of the 203(k) program. From 1999 to 2005, the amount of 203(k) loans declined, but the volume started to climb in 2006 when approximately 3,000 loans joined the program. In the fiscal year of 2008, the program insured 6,749 loans, doubling from 2007, but the program topped 11,000 as of June 30, 2009. The volume of 203(k) loans mirrors the growth and fall of the housing bubble. While prices soared in 2005 and 2006, the demand for the program dwindled. After the bubble burst and foreclosure inventories stacked up, the 203(k) once more attracted borrowers. The volume of loans originated under the program is back up to a level unseen since 1999. “In fiscal years 2008 and 2009, demand for 203(k) loans increased because of limited availability of home equity lines of credit to make property repairs,” the report reads. In total, the program insures approximately $2.7bn in outstanding loans. Write to Jon Prior.

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