President signs massive housing billMortgages Bought & SoldUpdated on Aug 3, 2008 View more like this | Visit PLAINFIELD, NJ | Contact NJ Mobile Fusion, LLC |
WASHINGTON July 30, 2008- Today President Bush signed a housing bill intended to rescue about 15 percent of the cash strapped homeowners in fear of foreclosure in the next year or so. The Congressional Budget Office estimates that 400,000 borrowers with $68 billion in loans may benefit from the program, but the bill allows for as many as 2 million borrowers to participate in the program.
Please note, this bill is very, very complex but I have been studying and reviewing this bill since it was submitted to congress July 30, 2007, so I will be happy to answer all your questions and concerns.
Here are a few highlights of the bill:
Who's eligible?
Qualified borrowers must live in their homes and have loans that were issued between January 2005 and June 2007. Additionally, they must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.
They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage, and prove that they are not deliberately defaulting just to obtain lower payments.
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, unless it's to pay for necessary upkeep on the home. To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the home's appraised value at the time.
How does the refinancing process work?
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 20%, 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 do a new appraisal to determine the home's current value, as well as examine and verify income statements, bank accounts, job histories and credit scores.
Based on that new appraised home value, the FHA lender must determine how much the original lender has to reduce the original mortgage, so that it will reflect 90% of the home's market value. If the original lender agrees to the write down, the new lender buys the old loan and takes over the reworked mortgage. As part of the deal, the old lender writes off any fees and penalties on the original mortgage, including prepayment penalties, and accepts the proceeds from the new loan on a paid-in-full basis. Additionally, it pays the FHA an up-front premium equal to 3% of the mortgage principal.
What will I save?
Savings depend on what borrowers are paying for their present loan and where they live, but for most people it will be substantial, even after factoring in the FHA fees. Additionally, the FHA loans carry reasonable interest rates, which are fixed for the life of the loan, as opposed to a sub prime adjustable-rate mortgage that can jump higher every six months.
Please forward this email to anyone else you think could benefit from this information or have them call my office directly to set up an appointment. (973) 743-9263.
Please note, this bill is very, very complex but I have been studying and reviewing this bill since it was submitted to congress July 30, 2007, so I will be happy to answer all your questions and concerns.
Here are a few highlights of the bill:
Who's eligible?
Qualified borrowers must live in their homes and have loans that were issued between January 2005 and June 2007. Additionally, they must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.
They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage, and prove that they are not deliberately defaulting just to obtain lower payments.
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, unless it's to pay for necessary upkeep on the home. To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the home's appraised value at the time.
How does the refinancing process work?
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 20%, 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 do a new appraisal to determine the home's current value, as well as examine and verify income statements, bank accounts, job histories and credit scores.
Based on that new appraised home value, the FHA lender must determine how much the original lender has to reduce the original mortgage, so that it will reflect 90% of the home's market value. If the original lender agrees to the write down, the new lender buys the old loan and takes over the reworked mortgage. As part of the deal, the old lender writes off any fees and penalties on the original mortgage, including prepayment penalties, and accepts the proceeds from the new loan on a paid-in-full basis. Additionally, it pays the FHA an up-front premium equal to 3% of the mortgage principal.
What will I save?
Savings depend on what borrowers are paying for their present loan and where they live, but for most people it will be substantial, even after factoring in the FHA fees. Additionally, the FHA loans carry reasonable interest rates, which are fixed for the life of the loan, as opposed to a sub prime adjustable-rate mortgage that can jump higher every six months.
Please forward this email to anyone else you think could benefit from this information or have them call my office directly to set up an appointment. (973) 743-9263.
