FHA Rescue - Housing Rescue Bill
This just in from Floyd Walters: "Last week I shared with you a few facts of the new legislation signed by President Bush to address the housing crisis. The bill contains over 700 pages of law and that does not include the implementation rules that will be issues by the different agencies, including Fannie Mae, Freddie Mac, FHA and the IRS, among others. Should make for some interesting reading.
This week I wanted to focus on one of the aspects of the bill that got the most attention in the press. That is the FHA’s HOPE FOR HOMEOWNER’S PROGRAM (aka FHA Rescue). Here are some facts that any consumer investigating refinancing using this program will want to know.
Fact #1: Participation in the program is voluntary on the part of the existing lender. No lender of a distressed Borrower is required to accept the terms of the program!
Fact #2: The Lender will have to write down their loan to 90% of the current appraised value and absorb that loss.
Fact #3: The Borrower will have to share future equity appreciation with the lender (this is a big one). The percentage the Borrower has to share ranges from 100% in the first year, to 90% in the second year, 80% in the third year, and so on. It is not absolutely clear in what I have read, but it appears that once you reach five years the shared appreciation levels off at 50% and stays there.
Fact #4: The Borrower has to pay a 1.5% annual fee for the benefit of having this loan. So, if a borrower has a $300,000 loan he pays $375 per month in addition to his mortgage payment for his FHA Mortgage Insurance (think of it as PMI).
It will be very interesting to see how lenders are attracted to this opportunity (the upside being they avoid a foreclosure and the additional losses that can be associated with that plan. It will be just as interesting if the consumer embraces the PMI costs and shared appreciation but in exchange for being able to keep their home this might be a very attractive option."
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8/19/2008 7:59 PM
Los Angeles Real Estate Blog wrote:
Just in from Floyd at BWA Mortgage: "I wanted to share with you this week just a little more about HR3221 (the 700 page congressional law we have been discussing the last few weeks). I wanted to focus on how the Tax Credit portion of the law will work. My standard caveat to check with a tax professional (please don’t take my word as fact) before proceeding applies.Fact #1: Only First Time Home buyers qualify. To be a First Time Home Buyer, you cannot have owned a home in the last three years. Fact #2: ...
I am encouraged by the efforts of our government. I am not sure the Housing Rescue bill is a magic bullet; However, it is an important piece in the moves that need to right the ship
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James, thanks for your input, I don't know if this will help or not.... Seems like more BS; I think what I would like to see is: what can be done so this doesn't happen again? This being, lenders making loans that people couldn't afford to pay back. People with poor credit and no down payment getting loans. These loans were higher risk, resulting in higher rates and fees to the banks and Wall Street - it was like a feeding frenzy.....
How many credit card offerings do you get a week? I think I get 5-10 a week (really). This will be the next crisis, people will borrow and stop paying, because they can't afford it. In my opinion these companies aren't properly evaluating their risk.AND many losing their homes are homeowners that have owned their home for years but have spent their equity and are now left with payments they can't afford and owing more than their home is worth - they have been living off their equity.
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Would anyone know if we can start the paperwork for this program early and would I be contacting The FHA first and then the lender (or both at the same time???)
I have a lawyer handling my foreclosure but he wouldn't get involved with this program.
Thanks
Dan
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Is your attorney able to at least direct you? I am not certain, but I think whoever you call will be hours on the phone trying to find the right department. You might try 888-995-HOPE and see if they can offer you some help or answer questions.
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Phyllis:
Thanks for your reply. I want to check this out as soon as possible. I will let you know if I get any solid information.
Dan
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Please do, I hope things sort themself out for you.
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