Will the Housing Act Help?

Posted on August 25, 2008
Filed Under Foreclosures |

Now that the foreclosure bill has been passed, many are wondering if it will really stop the tidal wave of foreclosures.

The housing bill will give the Federal Housing Administration three hundred billion dollars to refinance mortgage loans that were made before the first of this year. This three hundred billion dollars will need to be between October of this year to September 2011. The bill is supposed to help homeowners who cannot afford their current loan payments to refinance. Critics of the bill say that it will not help many of the people who are facing foreclosure. The truth is, the bill will bring help some homeowners but if you look at many aspects of the bill, it is really not intended to help those who are in trouble and may lose their homes.

The qualifications to get FHA refinancing will disqualify many from obtaining help. First the borrower must prove that they cannot currently afford their mortgage payments. The question is if they are getting by on what they currently have, will they be disqualified from the program. The FHA may assume your family can leave off of one hundred dollars a week, sell their car, and can take public transportation even though it may not be convenient. “Financially strapped” may be a subjective term when it comes to

Also, the homeowner needs to show that they qualify for an FHA loan based on verifiable income. This income should be verifiable through tax returns. This should not be too big of a problem for some homeowners but it may be a problem for some homeowners who dealt with income numbers being “fudged” by unethical bankers.

If there is a second mortgage, held by someone other than the lender that holds the first mortgage. The second mortgage needs to be paid off. There is hardly any holder of a second mortgage that will release a homeowner from a mortgage without getting a decent portion of the loan paid off. For many homeowners this pretty much eliminates the possibility of getting an FHA loan.

To qualify for an FHA loan you must also be able to put down three precent or more of the new FHA loan. A lot of borrowers are not in a position to do this. they can borrow from a party that is not part of the transaction but this loan must be put completely under the FHA mortgage. This means that it cannot be paid off before the FHA loan can be paid off. Since these loans are usually thirty year fixed rate loans, it may be quite a while before you pay off the loan.

Also if the homeowner sells the home or gets it refinanced over the next five years following the FHA loan, the loan amount will be split between the FHA loan and the other borrower. The rate starts at ninety percents to your lender and that amount goes down to fifty percent in the fifth year. This is indeed a good bargain for the borrower.

A homeowner must know that there is a dilemma if you choose to rely on the FHA. If a borrower has their mind set on getting an FHA loan, they might miss their chance of getting loan modification which could help them keep their home.