Home for Home Ownership Relief Act

My take on this bill is that it will be a dismal failure. Any program being run by the crooks in our federal government, combined with lenders that have pocketed billions of dollars in government handouts,the screw the homeowners attitude of lenders, the high upfront costs to the homeowners (who are already behind on payments)and the fact that only a small percentage of homeowners will be covered means certain failure.

The Hope for Homeowners Act of 2008 is intended to provide mortgage relief for homeowners that ahve home mortgages they can no longer afford. The Act authorizes the Federal Housing Administration (FHA) to insure up to $300 billion of 30-year fixed rate loans for homeowners so they can refinance out of their existing loans into an FHA.

Here is a summary of what's in the Act:

Hope for Homeowners follows FHA’s long-standing requirement that new loans be based on a family’s long-term ability to repay the mortgage. Only owner occupied homes are eligible for FHA-insured mortgages. So if you have a second home or an investment property, they are not covered. Borrowers must also meet the following eligibility criteria:

* Their mortgage must have originated on or before January 1, 2008;

* Their mortgage debt-to-income must be at least 31 percent;

* They cannot afford their current loan;

* They did not intentionally miss mortgage payments; and

* They do not own second homes.

Features of FHA-insured loans under the new program include:

* 30-year, fixed rate mortgage;

* Maximum 90 percent loan-to-value ratio;

* No prepayment penalties;

* $550,440 maximum mortgage amount;

* Extinguishment of any subordinate liens; and

* New home appraisals from FHA-approved appraisers.

HUD, Treasury, FDIC and the Federal Reserve will form the Congressionally-mandated Board of Directors and work together to establish additional program standards.

Voluntary Lender Participation

This is where the success of the bill gets dicey because the lenders have generally taken the recent government bailout money and used it to pay the bonuses for their corporate officers. FHA wants lenders to offer homeowners an alternative to foreclosing on borrowers. Lenders have been encouraged to write-down the outstanding mortgage principal balances to 90 percent of the new value of the property.

In many cases, reductions in principle will cost lenders less than the losses associated with foreclosure. However, I have seen that most lenders are not cooperating with distressed homeowners. Only God knows what the lenders have done with the their government handouts, they certainly have not used them to help home owners.

Funding

FHA is insuring up to $300 billion in new loans. Borrowers will pay an upfront premium of 3 percent of the original mortgage amount and an annual premium of 1.5 percent of the outstanding mortgage amount. This means that most homeowners will not be able to take advantage of the program - after all, if you are behind on your mortgage payments to begin with - who has 3% to put down. Any additional costs incurred by FHA will be reimbursed by Fannie Mae and Freddie Mac (remember these two companies that recently received multi billion government bailouts and then rewarded their CEOs with multimillion dollar bonus packages?).

Program Timeline The program will last from October 1, 2008 through September 30, 2011

So what do you think? Will this really help any homeowners or will it just make bank CEOs wealthier?

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