Law holds up FHA loans for some stuck in subprime mess
By Paris Goodnight
A local mortgage broker is warning that a new state law designed to stop predatory lending could also prevent some N.C. homeowners from refinancing and saving their homes.
Brad Randall of HRC Associates Inc. says he is trying to help more than a dozen local residents participate in the FHASecure program approved by Congress. The federal program aims to help people who financed their homes with expensive, “subprime” loans whose payments increase dramatically over time.
In addition to giving subprime homeowners a fixed-rate mortgage, the federal bailout program pays a number of the insurance fees that protect mortgage lenders, fees normally paid by the homeowner.
But Randall said the way North Carolina law now counts those fees, it makes the overall mortgage package higher than a certain trigger allows, meaning homeowners can’t meet the requirements.
Randall said none of 19 clients he’s currently dealing with in Rowan County would be able to qualify for Federal Housing Administration bailout loans.
He said other states have passed similar legislation but exempted FHA and Veterans Administration loans. He spoke with members of the Mortgage Bankers Association on Thursday night and they agreed North Carolina would have to exempt FHA and VA loans to make the program work.
Randall gave an example of someone owing $120,000 with an original loan seeking to refinance. The borrower could save $100 a month in payments under a lower fixed interest rate, but the total new loan package might rise to $120,500. Randall said the trigger takes all fees into account, no matter who is paying them, and would bump out the new loan.
“They’re (the borrowers) not paying the fees. Someone else is paying for them,” Randall said.
Randall said the bill gives the N.C. Commissioner of Banks leeway to waive the additional requirements for the bailout homeowners.
No one else contacted by the Salisbury Post said they knew of any problem with the N.C. predatory lending law.
Rep. Lorene Coates said she hadn’t heard of any concerns with the bill, but she said if wording needs to be changed, it could be done during the next session of state lawmakers. That doesn’t come until May.
A representative from bill author Dan Blue’s office said Thursday that no one had contacted them about any trouble with the law, but representatives from N.C. Justice Center continue to deal with home foreclosures and bring it to lawmakers’ attention.
The issue is a continuing one that lawmakers are well aware of, and Blue and Rep. Walter Church co-chair a committee that is holding a public meeting Feb. 26 at 12:30 p.m. in Raleigh on the new law and other issues facing homeowners. You can e-mail firstname.lastname@example.org with any concerns.
An official with the Housing and Urban Development office in Washington was checking on North Carolina’s situation but hadn’t returned a message by Friday.
In the meantime, Randall said, “I’ve got brokers down to Charlotte trying to get around it. But there’s no way to do it,” he said.
Compliance review companies are paid to look over FHA loan documents, and if they follow the summary to the letter, all Randall’s clients will be out of luck. He mentioned laid-off Freightliner workers, those displaced when textile mills closed down and veterans returning from the warfront.
It’s not stopping him from working. He said he’s trying to keep it business as usual in his office ó and hopes that someone in the Legislature or banking office can offer his clients some relief.
Contact Paris Goodnight at pgoodnight@salisburypost. com or 704-797-4255.