"Helping Families to Save Their Homes Act"
May 20, 2009
Yesterday, both the U.S. Senate and the House of Representatives passed the "Helping Families Save Their Homes Act". This bill would expand an existing $300 billion program that encourages lenders to write down an individual's mortgage if the homeowner agrees to pay a mortgage insurance premium similar to what has been required for FHA insured mortgages. The program would expire in 2011, but homeowners could presently refinance their existing loan for a 30 year fixed rate loan backed by the Federal Housing Administration. Unfortunately, because of the strict eligibility requirements, to date, only some 50 homeowners are refinancing through the program compared with the projected 400,000 the bill was anticipated to assist.
The new legislation would expand eligibility, but still would be limited by the maximum loan amount of $417,000 or $769,000 in high priced areas.
Unfortunately, the government seems not to recognize that many of the homeowners who have defaulted have loans that exceed the present value of their properties. Reducing the interest rate that they pay may help some, but the sticking point for obtaining a refinance is the current appraised value, often as much as 40-50% less than the mortgage against the property. Homeowners have to be willing to recognize that they have no equity, but that they love their homes and they can afford the payments in order to be willing to consider this arrangement.
If home prices do not recover significantly in the next several years, homeowners may still be without equity and short sales may still be a necessity. It really is complicated and perhaps mare complicated that letting the foreclosure process re set home prices. Admittedly this would not be a good thing for lenders, but might be the more necessary solution to the present economic crisis.
Yesterday, both the U.S. Senate and the House of Representatives passed the "Helping Families Save Their Homes Act". This bill would expand an existing $300 billion program that encourages lenders to write down an individual's mortgage if the homeowner agrees to pay a mortgage insurance premium similar to what has been required for FHA insured mortgages. The program would expire in 2011, but homeowners could presently refinance their existing loan for a 30 year fixed rate loan backed by the Federal Housing Administration. Unfortunately, because of the strict eligibility requirements, to date, only some 50 homeowners are refinancing through the program compared with the projected 400,000 the bill was anticipated to assist.
The new legislation would expand eligibility, but still would be limited by the maximum loan amount of $417,000 or $769,000 in high priced areas.
Unfortunately, the government seems not to recognize that many of the homeowners who have defaulted have loans that exceed the present value of their properties. Reducing the interest rate that they pay may help some, but the sticking point for obtaining a refinance is the current appraised value, often as much as 40-50% less than the mortgage against the property. Homeowners have to be willing to recognize that they have no equity, but that they love their homes and they can afford the payments in order to be willing to consider this arrangement.
If home prices do not recover significantly in the next several years, homeowners may still be without equity and short sales may still be a necessity. It really is complicated and perhaps mare complicated that letting the foreclosure process re set home prices. Admittedly this would not be a good thing for lenders, but might be the more necessary solution to the present economic crisis.
posted by shirley harry at 8:40 AM
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