Helping the Housing Crisis

The Federal Housing Administration’s initial plan of being able to provide more housing programs to help improve and increase the housing market has backfired. The constant fall of housing prices and escalation of interest rates are causing an economic abasement. The government is rapidly trying to do their part to save the economy from its continuous flow into a market of recession. Below are some newly created programs signed and/or amended by the government to assist struggling homeowners, lending institutions, and the rest of the housing market during what appears to be a slowly occurring economic meltdown.

Hope for Homeowners Program

The Hope for Homeowners program was signed into law to assist homeowners who are having difficulty making their mortgage payments. The program will allow borrowers to refinance their existing mortgage into an FHA insured mortgage they can afford. In order for the borrower(s) to qualify for this program, they must meet certain criteria, which can be found on the FHA website:

• Their mortgage must have originated on or before January 1, 2008;
• Their mortgage debt-to-income must be at least 31 percent;
• They cannot afford their current loan;
• They did not intentionally miss mortgage payments; and
• They do not own second homes.

Features of FHA-insured loans under the new program include:

• 30-year, fixed rate mortgage;
• Maximum 90 percent loan-to-value ratio;
• No prepayment penalties;
• $550,440 maximum mortgage amount;
• Extinguishment of any subordinate liens; and
• New home appraisals from FHA-approved appraisers.

This new program will be effective October 1, 2008 until September 30, 2011.

FHASecure

In addition to the Hope for Homeowners program, FHA has also expanded their FHASecure program, which was initially offered to borrowers with good credit rating prior to their newly adjusted adjustable-mortgage payment. This offered borrowers a chance to reinstate their mortgage situation and prevent foreclosure from taking place. Prepayment penalties are also non-existent and the premium mortgage insurance covers any losses to all involved parties.

This program was created for homeowners with sub-prime mortgages that will be adjusted between the periods of June 2005 and December 2009. In addition, income stability, employment history, and 3{ef6a2958fe8e96bc49a2b3c1c7204a1bbdb5dac70ce68e07dc54113a68252ca4} equity on their home must be proven.

The recent adjustment to this program allows homeowners who have had up to three missed mortgage payments in the past 12 months. In addition, taxpayers will also be more protected from risks caused by this government funded program.

FHA Loss Mitigation Program

Loss mitigation specializes in helping struggling homeowners negotiate their loan situations with lenders and different mortgage held institutions. Some of the services provided by loss mitigation specialists are forbearance agreements, repayment plans, loan modifications, and partial claims. On August 14, 2008, FHA announced some changes to its Loss Mitigation program that will help strengthen and promote the resolution for mortgage delinquencies.

State Programs:

State governments are also doing their part to help assist struggling homeowners. Below are two examples.

Additional funding in California announced Aug 15, 2008 of $105M for affordable housing and community development

This funding will provide down payment assistance for first time homebuyers, assistance for families and individuals who need housing assistance and housing solutions for individuals with HIV/AIDS. In addition, it will provide additional funds for community development and affordable housing.

The funding breakdown as stated by the U.S. Department of Housing and Urban Development is as follows:

• $ 39,262,869 in Community Development Block Grant (CDBG) funds;
• $ 55,776,502 in HOME Investment Partnerships (HOME) funding;
• $ 371,363 in American Dream Down payment initiative;
• $ 6,757,419 in Emergency Shelter Grant (ESG); and,
• $ 3,069,000 for Housing Opportunities for Persons with AIDS (HOPWA).
• $105,237,153 TOTAL

New York announces additional restrictions for subprime mortgages, the required registration of mortgage servicers, and amendment foreclosure requirements

Sub-prime loans provided by lenders and brokers in New York can no longer charge prepayment penalties along with fees that may be construed as hidden or abusive towards the borrower. Such fees may include yield spread premiums and others that are awarded through teaser rates.

All mortgage servicers are required to register under the New York Banking Law as of July 1, 2009. This registration will ensure that the mortgage servicer is in agreement of providing service based on the borrower’s interest and acting appropriately to prevent any type of mortgage fraud, including the support of false appraisal values.

The foreclosure requirements have been amended to give struggling homeowners, who are on the verge of foreclosure, ample time to do what is necessary to prevent or prepare for the adverse circumstances that can be caused by foreclosure. All mortgage servicers are required to give necessary notices of default to borrowers prior to the commencement of a foreclosure.