Will The Bail-Out Help Home Owners….You Tell Me! | Bank Bail Out Effects On Short Sales | Realtor Coaching
Borrowers who took out a mortgage on or before Jan. 1 can apply if they have made at least six payments on their existing loan and they do not own a second home. If their lender goes along with the deal, they can refinance into a 30-year, fixed-rate loan.
They will need to verify that they cannot pay their existing loan without help and that their monthly payments were more than 31 percent of their gross monthly income as of March.
The Congressional Budget Office estimates that the new Hope for Homeowners program could help 400,000 people during its three-year life span.
“But compare that to the fact that we had 300,000 foreclosure filings in the last month alone,” said John Taylor, chief executive of the National Community Reinvestment Coalition, a housing advocacy group. “Have no illusions, this is going to help some homeowners, but it’s not going to solve the foreclosure crisis by any stretch.”
The final participation numbers will depend largely on lenders. The FHA doesn’t make loans directly; it insures loans by private lenders.
In this program, the FHA will insure a loan for only 90 percent of the home’s current value. With home prices plunging, borrowers who have little or no equity left in their homes need the lender to forgive the rest of the debt in order to qualify for the refinancing
Some lenders have resisted doing that in the recent past, preferring instead to lower interest rates or rearrange payment schedules on troubled loans. “Lenders are looking at this as a last resort,” said Guy Cecala, publisher of Inside Mortgage Finance. Of the 369,000 people who refinanced in the past year using a previous version of this program, only 1 percent of them were delinquent, according to the FHA.
Complicating matters is that borrowers who financed their homes using two loans must get both lenders to agree to refinance, even though the second-mortgage lender most likely will not get paid off under this arrangement.
Yesterday, Preston acknowledged that for lenders, the new program “may not be the preferred route in many situations.”
The FHA has received $29.5 million so far to upgrade its technology and hire new staff to handle this program, housing officials said.
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