Will FHA Come To The Rescue of HomeOwners in California?

The politicians in Washington are creating a “bail-out” for banks and homeowners that actually has more good features and bad.

Homeowners that are not paying their mortgages and banks facing big losses would get government help under a foreclosure rescue that has broad Washington, bipartisan support.

The lynch-pin of the plan would let the Federal Housing Administration (FHA) back up to $300 billion–NOT ENOUGH!!! in new loans to give struggling homeowners more affordable, fixed-rate mortgages. It allows lenders who agree to take a substantial loss on the mortgages to reclaim at least some money and avoid a costly foreclosure. 

The piece that’s missing is how hoes it help the homeowner that is 4 months down on their mortgage and is facing a Notice of Default, how do they qualify for the new loan.  Are banks and credit companies willing to show a Notice of Default or home foreclosures as a hick-cup on a credit report? 

Here’s are the “talking points to the Bill.”

  • A refundable tax credit of up to $8,000 for first-time homebuyers.
  • Establishes a new, temporary FHA program (HOPE for Homeowners) to help homeowners who are at risk of losing their homes to refinance their mortgages, if their lenders voluntarily agree to participate in the program.
  • The program will be paid for using fees paid by Fannie Mae and Freddie Mac –- not taxpayer dollars.
  • Only certain owner-occupants would be eligible to refinance –- no investors or investor properties will qualify.
  • Creates a tough, new regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks to reduce the possibility of an expensive taxpayer bailout someday.
  • Sets minimum standards for mortgage brokers and strengthens the “Truth in Lending Act” (to require better disclosure to borrowers before they sign a mortgage).
  • Provides mortgage protections for service members and veterans, such as lengthening the time a lender must wait before staring foreclosure proceedings from three months to nine months after a soldier returns from service.
  • A standard property tax deduction for taxpayers who don’t itemize on their returns.
  • More than $10 billion in additional bond authority that states could use to provide loans to first-time homebuyers or to finance the construction of affordable rental housing.
  • An additional $150 million for foreclosure prevention counseling.

 As a real estate professional in
Walnut Creek, California the positive piece of the bill in my opinion is that this will modernize FHA and create a new regulator and tighter controls on Fannie Mae and Freddie Mac, the government-sponsored mortgage giants.

“Madam Pelosi, please be sure to keep loan amounts high enough for California real estate.”  In advance, thanks for putting more regulations on an industry that is doing a fine job in correcting itself.  There was plenty of creed in the past several years, but I am skeptical that government regulations will solve these problems.