You may have heard in the news recently that the government was working on solutions for the mortgage loan crisis being experienced across our country. I figured this would be a great follow up to last month’s article, and very timely as well. So let’s get down to it.
The solution is a two part solution. One part is currently in place and is up and running for you to use. The other part will take a little longer as it is proposed legislation that will need to pass through the Congress and the House of Representatives.
Part one of the solution is a call by the HOPE NOW alliance of private and public sector officials for a five year freeze on interest rates for those who can now afford to keep paying their mortgage, but will be at risk of foreclosure if their adjustable rate balloons at the end of the locked period. The hope is that the five-year freeze will buy time for the housing sales and prices to start rising again. Such a rebound would enable homeowners to refinance their current adjustable rate mortgages into fixed-rate loans with more affordable monthly payments.
HOPE NOW is a cooperative effort between counselors, investors, and lenders to maximize outreach efforts to home owners in distress. The organization supports my advice listed in last month’s article to contact your lender if you are having trouble paying your mortgage, but it also takes it one step further by offering a toll free number to contact a HUD approved credit counselor. The toll free number is (888) 995-HOPE. They also host a web site that you can visit; www.hopenow.com.
The HOPE NOW organization is comprised of credit counseling agencies such as Consumer Credit Counseling Service of Atlanta, and Home Ownership Preservation Foundation. Lenders who have contributed to the alliance include Bank of America, Wells Fargo, Countrywide, First Horizon, and many more. Investors who are contributing include Fannie Mae, Freddie Mac, and American Securitization Forum. The seriousness of the mortgage industry is seen in the caliber of organizations getting involved. Think you’re alone in this mess, think again! President Bush said that potentially 1.2 million homeowners could benefit from the program. I’d be asking, "Am I one of them?"
Part two of the solution consists of the creation of a new Federal Housing Administration program called FHA-Secure. This program would provide a refinance option to borrowers whose adjustable rate mortgage will be going up by allowing FHA to be more flexible in how to offset the refinancing. Since this is an FHA loan program, any reputable lender should be able to tell you more about the qualification criteria.
More complex solutions are being established for regulation changes to the mortgage industry. President Bush also stated that soon the Federal Reserve intends to announce stronger lending standards that will protect borrowers. Bush also called on Congress to play a role in modernizing FHA, and enabling government sponsored enterprises like Fannie Mae and Freddie Mac to move more liquidity into the mortgage market. He also called on Congress to amend tax laws that punish already financially distressed individuals who receive a relief of debt from their lender. "Congress needs to temporarily reform the tax code to help homeowners refinance during this time of housing market stress. Under current law, if the value of your house declines and your bank forgives a portion of your mortgage, the tax code treats the amount forgiven as taxable income," Bush said. "When you’re worried about making your payments, higher taxes are the last thing you need."
If you have any questions about your current mortgage situation or would like more information regarding real estate, please feel free to contact me at (916) 536-4235. I understand this may be a difficult time and a difficult matter. Having an advocate on your side helps a lot. As seen above you are not in this alone and many people are available for you to seek help. It’s up to you to reach out and ask.