Homeowners that can’t afford their current mortgage payments because of declining home values and increased interest rates from adjustable arms may have relief from the Federal Government. The house passed the Foreclosure relief bill by a margin of 272-152 that is aimed at helping 400,000 homeowners on the brink of foreclosure and give government support for troubled mortgage giants Fannie Mae and Freddie Mac. The bill will go back to the Senate where final passage is expected and the White House is changing its stance and backing the bill.
The foreclosures have been at all time highs with many homeowners unable to refinance because of declining home values and can’t keep up with increased mortgage payments with interest rate increases that went along with the adjustable arms taken out. “This isn’t a perfect solution by any means,” said Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee. But, he added, it enjoys support from a broad and unlikely coalition, including bankers, housing advocates and governors and mayors struggling with the foreclosure crisis.
The relief will come from lenders that would agree to take a loss on the difference between the mortgage amount and the current value minus 10% but would save lenders costly foreclosures. The Federal Housing Athourity will insure up to $300 billion of new 30 year fixed rate mortgages for borrowers at risk and in owner-occupied homes only.
Lenders would also pay the FHA 3% of a home’s appraised value and borrowers would have an annual premium of 1.5% of their new loan balance and share the profits after selling with the government.
