President Bush signs new foreclosure relief law - how it can help homeowners
July 30th, 2008 | Published in Florida Foreclosure Fraud, foreclosure defense, foreclosure relief
President Bush this morning signed into law new federal legislation aimed at addressing the nation’s current foreclosure crisis. Some of the provisions of this new law, which takes effect October 1, 2008, may offer relief to certain homeowners in foreclosure. Here’s how.
FHA-backed Refinancing
The Federal Housing Authority now has the ability to insure up to $300 billion dollars in loans to allow troubled homeowners to refinance their home loans. Banks would be more willing to extend loans to qualified homeowners because the loans are backed by the federal government.
Who Qualifies
In order to qualify for a new FHA-backed loan, the homeowners must meet certain criteria.
- They must live in the home - no landlords allowed.
- They must currently have home loans issued between January 2005 and June 2007.
- They must be spending at least 31% of their gross monthly income on mortgage debt.
- A borrower may either be current or behind on their existing loans, but they will have to prove that they cannot continue to make their current payments.
- Borrowers must first pay off any other debt on the home (such as home equity loans) and may not get a new one for five years, except to pay for maintaining the home.
- The new loans are subject to FHA approval.
- The original lender would have to agree to take a substantial loss on the original loan, but gets to avoid filing foreclosure - which might cost them more in the long run.
(Source: CNNMoney )
Depending on each homeowner’s particular circumstances, this might be a viable way to get out of a bad loan and into a more affordable one - after October 1. Officials in the Bush administration, though, are already bad-mouthing the new law, saying that other laws already in place will help more homeowners than this one, and noting that Congress failed to provide funding for the new loan guarantees. Steve Preston, Secretary of Housing and Urban Development, said: “I think it may be helpful on the margin but ultimately what we need is new homebuyers to come into this market and buy up the inventory of homes.”
UPDATE: The New York Times thinks the new law is better than Santa Claus.