Federal Help for the Housing Crisis
May 15, 2008
If you listen to the news, you already know that Federal and state legislators are trying to craft bills that will help struggling homeowners avoid foreclosure, help the overall sagging real estate market, and perhaps even prevent similar problems from happening in the future.
One of those bills is called the Hope for Homeowners Act. This bill was introduced by Sen. Chris Dodd, D-Conn., and Rep. Barney Frank, D-Mass., and it is considered one of the most aggressive solutions for struggling homeowners.
This particular bill would allow the Federal Housing Administration to refinance up to $300 billion in unaffordable mortgages for up to 2 million owner-occupied homes. It would also give states $10 billion to buy and fix up foreclosed homes. It should be noted that is only one of several bills being considered.
With the Dodd-Frank bill, lenders would voluntarily submit their bad mortgages for refinancing, which would also mean taking a drastic cut on the amount owed. In exchange they would get a lump-sum payoff. Mortgages would be issued for 90 percent of homes’ current values. In many cases, this would be less than the original amount of the mortgage. The FHA would take part of the new loan as a fee, and then would share in future appreciation.
Many consumer advocates support the bill, but the White House and many Republicans do not like it. “This will help those in need who are on the verge of losing their homes,” said Pam Banks, an advocate with the nonprofit Consumers Union in Washington.
Many mortgage bankers support the bill as well, although they would prefer to get a share of future appreciation, as well as the option to write off less money on each mortgage.