Dec 16, 2008
On Monday December 16th, House Speaker Nancy Pelosi said that she is directing House Financial Services Committee chairman Barney Frank, D-Mass to write legislation that would require the Treasury to move ahead with helping homeowners avoid foreclosure as a precursor to access to the second $350 billion in government bank bailouts fund. At a news conference Pelosi said. “It was very clearly spelled out in the initial legislation that funds would be used for mortgage foreclosure forbearance,”
Spokesman for the House Financial Services Committee, Steve Adamske , said that Barney Frank has begun work on the bill Monday and expects it to be ready during the first week of the New Year. There is a possibility that legislation could be expedited it the Treasury seek out the funds at an earlier timer. Adamske mentioned that that Frank is considering a variety of foreclosure mitigation conditions on the funds, which would include a provision to make a portion of the funds available for modifying mortgages which could help millions of American homeowners avoid foreclosure.
Adamske said that the bill that Frank is working on may also include provisions to expand the FHA Hope for Homeowners Program that which will refinance mortgages for distressed borrowers that can afford a new loan insured by the FHA.
The measure may also encourage the Treasury to allocate the funds to buy mortgage backed securities and individual mortgages as lawmakers expected the Treasury Dept to do shortly after Oct. 3 2008, when the Bush administration and Congress approved a $700 billion bank bailout fund. Instead, as the markets continued to plummet, Treasury Secretary Henry Paulson decided to use a provision in the new law to buy large minority stakes in financial institutions in an effort of rapidly reinstating confidence in the banks.
Federal Deposit Insurance Corp. chairwoman Sheila Bair is seeking $24.4 billion of the funds for a mortgage modification program she believes could help avoid 1.5 million foreclosures throughout the US.
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Nov 13, 2008
According to the Bush administration, the government may allow more borrowers be eligible for a $300 billion dollar plan that would allow distressed homeowners substitute high risk risk loans with modified, affordable loans . The “Hope for Homeowners” program was launched October 1, as part of a housing bill passed by lawmakers during the summer. Nevertheless there are fears that lenders won’t take part as they must willingly lessen the cost of a loan and take a loss.
With the current arrangement, the original lender is must take the loss on the difference between the present mortgage value and the newly modifided loan which is reset at for 90% of the current appraised value of the house. One possible change is to arrange the newly modified loan to approximately 97% of the present appraised home value, consequently requiring lenders to aquire a smaller loss than they would at the 90% level.Making that change and additional similar changes “would open up participation in the program,” said Steve Preston, Secretary of Department of Housing and Urban Development.
Estimations from the the Congressional Budget Office projected that the plan would let 400,000 distressed homeowners exchange risky loans for conventional 30 year, fixed loans with lower interest rate and thus more affordable payments. According to the Federal Housing Administration, the government has received under one hundred applications during the program’s first 2 weeks and only 20,0000, applications are estimated to be submitted by next fall. HUD declared recently that it has finished revising the good faith estimate of mortgage costs, which includes lender compensation to mortgage brokers. The government states that in 2010, these new forms will be mandatory and should save homeowners around $700 in closing costs.
In Washington DC, the head of a congressional committee said that Congress needs to overcome legal obstacles that keep mortgage servicing companies from doing more to help troubled borrowers save their homes from foreclosure.The Chairman of the House Financial Services Committee, Barney Frank , requested legislation to deal with contractual agreements that can obstruct servicing companies from signifigantly changing the provisions of troubled mortgages.
In response to lawmakers’ comments, mortgage backed securities investors and servicers explained that they alter many loans of distreed homeowners, within the legal restrictions they are up against. Tom Deutsch, Deputy Executive Director of the American Securitization Forum told the committe, “Because foreclosure is usually the most costly means of resolving a loan default, it is typically the least-preferred alternative for addressing a defaulted loan”
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