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Step Toward Repairing the Damage or Not?

July 31st, 2008 2:37 PM

WASHINGTON, July 30, 2008 /PRNewswire-USNewswire via COMTEX/ -- Today President Bush signed into law a housing bill passed by Congress aimed at stabilizing the shaky housing market.

A key part of the housing bill will permit struggling homeowners to refinance their mortgages through the Federal Housing Administration -- if their lenders and loan servicers agree. The Congressional Budget Office says this program could possibly help 400,000 homeowners, but because the program is voluntary for the loan servicers and lenders, the number of people that would actually avoid foreclosure is largely unknown. The new FHA program should be carefully monitored to see how many homeowners are actually served. Unfortunately, Wall Street analysts expect up to 6.5 million foreclosures over the next few years.

"By providing a chance to prevent more foreclosures, the housing bill provides an additional tool to help us move toward a more stable housing market and a recovering economy," said CRL President Michael Calhoun. "But the subprime crisis is a result of years of reckless lending, and it will take more time and effort to address it effectively."

 http://responsiblelending.org

After reading most of the bill, my initial thoughts were, "About Time". Our government is doing something good for our economy and the mortgage industry. The bill that was recently signed has a lot of very good and much needed help embedded within the proposal.

While this bill focuses on helping to keep the number of homes that could go into foreclosure from actually going into foreclosure, I believe our government overlooked one important aspect of foreclosures. What do we do about the homes that have gone past the foreclosure point and are now owned by a bank? Everyone in the mortgage or real estate industry knows that there are a record number of homes on the market. How do we continue to help people purchase homes whether it is a foreclosed home, REO or a brand new home? Instead, section 113. CASH INVESTMENT REQUIREMENT AND PROHIBITION OF SELLER-FUNDED DOWNPAYMENT ASSISTANCE removes one of the best programs we have to offer people who are buying a home!

Traditionally, an FHA loan allowed the seller of a property to contribute the 3% down needed for FHA financing. This allowed a person who did not quite have the 3% down to still get into a home at 97% financing. This type of transaction is at least 50% of the loans we do today.

If this is taken away, what do you thing will happen to the mortgage industry. Common sense says, the purchase market will go from slow to slower. Hmm? I truly hope our Congress has a plan to reinstate this vital tool that has already helped several hundreds of thousands of people get into homes.

How I see it, Congress did something good on one end of the process, but took away a perfectly great program that has helped keep our housing market afloat. All in all I’m not sure what to think? Any thoughts?

Posted by Dennis Noonan on July 31st, 2008 2:37 PMPost a Comment (0)