Stop Foreclosure and the New Housing Rescue Law Program
In July of this year, President Bush signed a new program that is supposed to help many homeowners to avoid foreclosure and stay in their homes.
In the last few weeks I have received many e-mails from subscribers asking me about this new Help Release Program, because they have not idea how this new program is suppose to help homeowners, and who may or may not qualify, but mostly they want to know, if they do qualify for help, would it come with any strings attached and will there be anything in the small print that they should know or be aware of?
This bill is suppose to alleviate the struggling housing market; but the reality is that this Bill aimed to bolster the Mortgage Finance Giants Fannie Mae and Freddie Mac, before they had to be bail out by the Government, and not exactly to the majority of struggling homeowners.
And yes, if, and it's a big "IF", but if you get to qualify and pass the vigorous scrutiny, and finally get approved for a FHA baked home Mortgage Loan, there are a lot of things that you need to be aware of, and you better read well because, as usual, it's very likely that you won't be explained with details all the strings that come attach along with this agreement.
In many, many cases people will be better off letting their homes go to foreclosure, rent for a year or two, and then when the home prices stop decreasing, star fresh and buy a new property.
To star; before homeowners can get FHA-backed mortgages, they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years.
This is a voluntary program, so lenders holding the original mortgage have to agree to rework a given loan before things can get started. The bill requires lenders to make major concessions, writing down the value of the loan to 90% of the home's current value. In areas where prices have plummeted by as much as 40%, that will mean a substantial loss for the lender.
But lenders won't sign off on a workout unless they think that they'll lose less money on that than they would by allowing a home to go through the costly foreclosure process.
Each loan will have to be underwritten by an FHA lender on a case-by-case basis. That means the banks will examine and verify income statements, bank accounts, job histories and credit scores. It's going to be as if you're applying for a new Mortgage Loan. You will have to meet all credit criteria to qualify.
Remembers for the Lenders is a voluntary program, so if the original lender agrees to the write-down, a new lender buys the old loan and takes over the reworked mortgage.
What does it cost?
There is a predetermined up-front cost for borrowers to bear. Loan origination fees will vary by lender, but these can usually be paid by the borrower over the life of the loan in the form of a slightly higher interest rate.
What is the catch?
Sometimes the remedy is worst than the illness. In fact the refinanced loans do come with many strings, so the homeowners must understand what they're getting into. For one thing, borrowers are responsible for paying a lifetime insurance premium to the FHA, which will be 1.5% of the principal annually.
For example, if your home is value at $250,000, you will promise to pay to the FHA an annual fee of $3,750.00. That is on top of whatever you're already paying for Home Insurance + Home taxes.
In conclusion; if you're like me that I was currently paying $5,000.00 in annual taxes, plus about $4,000.00 in Home Insurance, now you will have to come up with $12,750.00. Just for Taxes + Insurance + New Mortgage Fee, which is abusive, I think.
Borrowers also agree to share any profits from future home-price appreciation with the FHA. To do that, they'll pay a "3% exit fee" of the mortgage principal to the FHA when they resell or refinance. This means, if I later sell my house, let's say for 275,000, I will have to pay to the FHA a total of $8,250.00, just for the exit fee. But it gets worst.
I'll agree to pay the FHA 100% of any profits I realize from higher home prices if I sell or refinance within a year. So if the original loan principal is $200,000 and the home sells for $250,000, I, the borrower will owe the FHA $50,000.
In conclusion, if I sell my house anytime in the future, not matter how many years from now; I'll have to pay to the FHA a minimum of 50% of my profit.
Wrapping it up; with the financial crisis that this country is facing right now, is up in the air how, if ever, this new help release program will be implemented, but the fact is that no matter what is going to happen, you need to hold on to your house now more than ever, because that is the only way that you may take advantage of any help program that may be available in the future. To learn more make sure you visit my Website.
Sant, A. (2008, September 21). Stop Foreclosure and the New Housing Rescue Law Program. Retrieved December 26, 2008, from http://ezinearticles.com/?Stop-
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