Chris Mclaughlin reported today on a new plan of the federal government to resolve the escalating foreclosure crisis. It is not just and an issue confined to states like Florida, Arizona, Nevada, California, and Michigan. In the 28 days of February, 170 foreclosure filings were entered in the Dane County court records.
“New plans to push lenders to offer principal forgiveness and originate Federal Housing Administration (FHA)-backed refinance mortgages are leading borrower advocates to argue that the program isn’t enough to entice lenders and servicers to participate. Additionally, industry players are concerned over the potential moral hazard the initiative potentially presents. Under the terms of the voluntary program, lenders will be required to write down at least 10% of the mortgage principal for borrowers who are current on their payments. The program is open to borrowers whose mortgage isn’t currently insured by the FHA. The principal reduction must bring the new FHA loan to value (LTV) to 97.75% and make the new payments account for 31% of the borrower’s monthly income. The program also offers incentives to lenders who offer borrowers with second lien mortgages similar principal reduction and refinance options. The maximum allowed LTV of the combined loans is 115%.”
If, in future years, if the home increased in value prior to sale, the lenders writing off a portion of the debt would be able to recapture some of the appreciation. Despite McLaughlin’s scepticism, based on the failure of every previous federal plan to assist homeowners, this one seems more based on the realities of the marketplace than any previous plan.
This is about the only best idea i ever heard lately. Im about to lose my home suppose to be our retirement home i called the bank the modification dept and they said you cant afford your home shortsale it. Were is the insentive and care anymore about people it seem people are only interested in making money instead of keeping people in their home, no more american dreams, no hope most of my family are renting now with credit ruin if the govt let everybody credit ruin and dont keep people in their home then i guess we are really getting close to dooms day. God forgive us.