Obama’s Housing Bill
Announced today, this bill is a four-part bill. Many of the details are still cloudy and will be until borrowers and lenders put the bill into action.
The government says it will provide uniform guidance for home loans.
The bill did not cost the taxpayer as much money as any of the other bills have, but some of the critics of the bill argue that it will take a long time to become affective. The proponents of the bill say that the bill will slow home foreclosures and shore up the housing market. The housing market is still searching for a “bottom” and home values continue to decline.
The bill not only helps those that face foreclosure, but also lowers interest rates on those that have had hardship such as job loss or hours cut back, but have remained current on their mortgage payment. The plan is also to help households “at risk” even though they remain current on their mortgage payment.
The plan is not written to help people who bought homes and knew from the beginning that they could not afford the loan. Hopefully this time out they will have their income verified.
Part III of the plan outlines steps to keep mortgage rates low for 5 years. The treasury and Federal Reserve will continue to purchase mortgage-backed securities from Freddie Mac and Fannie Mae, and put $200 billion in capital into these agencies.
Part IV of the plan addresses problems where the mortgage exceeds home values. These amounts are treated as unsecured debt. A borrower in bankruptcy must first ask the lender for reconsideration. Borrowers would pay the debt under court ordered plans as an alternative to foreclosure.
Concerning the value to loan ratio of a home, Fannie Mae and Freddie Mac will be allowed to offer principle reductions on loans agreeing to 31% of the borrowers income. The treasury will share in part of the loss on this part of the bill.
The plan calls for “success fees”, or an incentive, of up to $1,000. per year of principle reduction if the borrower stays current on the mortgage payments for five years.
Two weeks from today, there will be guidelines for the entire mortgage industry to use in this lending.
This is a rough sketch of the bill, but thought you needed this information. Refinancing homes will sky rocket, so get set.
Lynda H. Startzman
Razorback Financial and Income Tax Services, Inc.
