Feds Trying Another Mortgage Assistance Plan

In another effort to help homeowners who are facing foreclosure, the Federal Housing Finance Agency (FHFA) announced a new plan to help speed up the process for renegotiating delinquent loans held by Fannie Mae and Freddie Mac. The plan, which will go into effect on December 15, provides guidelines for mortgage servicers to follow in modifying existing loans to help prevent future defaults. FHFA officials hope their new approach will become a model for all loan servicing companies and make it easier for them to also bring help to thousands of affected homeowners.

According to the Mortgage Bankers Association, more than 4 million homeowners were either behind on their payments or somewhere along in the foreclosure process at the end of June. That's 9% of borrowers with a mortgage loan. The problem is Fannie and Freddie only hold about 20% of these deliquent mortgages and the rest of the banks and loan servicers have been "all over the place" in trying to find ways to help at-risk borrowers. Unless they all get serious in their efforts to try and address the issues, homeowners (and the economy) will continue to suffer.

To that end, FHFA is recommending a variety of possible options in its new guidelines including a reduction in the interest rate, an extension of the loan term, an interest-free deferment of some payments on principal, or a combination of all three strategies. To qualify, borrowers would have to be at least three months behind in their mortgage payments and owe more than 90% of their homes' current worth. Non-owner occupied investor properties and those borrowers who have already filed for bankruptcy would be exempted from the program.

As with everything else the government has tried to do so far with regards to the housing crisis and foreclosure assistance, both political and economic critics were quick to pounce on the new plan. Some, like Chairman Sheila Blair of the FDIC saying "the plan falls short of what is needed to achieve wide-scale modifications of distressed mortgages" and John Taylor, head of the National Community Reinvestment Coalition saying "instead of a massive foreclosure prevention program, we wait for a homeowner to be in a failing position before doing anything," sound like reasonable concerns that need to be addressed. Others, which are better left unsaid, seem more like political posturing than actual constructive criticisms. And, with Treasury Secretary Paulson announcing that the government will not be using any of the funds from the previous $700 Billion bailout package to buy up distressed mortgage assets, it's fairly easy to understand why many people believe the government has no idea what it is really doing in trying to address the issues with the housing market. At this point, it looks like only time will tell whether or not any of their efforts will have a major impact at all.

Metro Mortgage Company is a federally regulated Mortgage Banker specializing in residential Florida home loans including Conventional, Jumbo and FHA/VA mortgages. Call us today at 888-617-3674.

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