Housing Help for Some but Not All

Posted on June 3rd, 2008 by saman

The senate housing bill that was supposed to assist around five hundred thousand dollars but it is unlikely that it will help that many.

The key provision in the bill would let the FHA insure three hundred billion dollars worth of loans for borrowers who are at risk. This would happen if the lenders and bank would write down the balances of loans that are underneath the value of the individual’s home. The Congress budget office has not put out a report on how much this proposal would cost.

The congressional budget office has estimated that about five hundred thousand home owners can get into this program. However, about thirty five percent of these borrowers may still default on their home loans. Considering those figures, the number of homeowners participating in this program who will get to keep their homes would be about three hundred thousand. This would mean that the number of foreclosure filings would be reduced by eight percent in the next couple of years.

Another thing that may keep down the number of homeowners that would be helped by the foreclosure bill is the official start date of the program. The congressional budget office believed that June 1st would be the official start date. However, the Senate version of the foreclosure bill, which is considered more effective than the House version of the bill would begin on October 1.

The time difference in these two versions of the bill will most likely not take into consideration the people the bill was supposed to help. The bill’s main target group for this foreclosure help was the one million homeowners with subprime or adjustable mortgages that were reset at the beginning of this year.

By October first, the homeowners who have had adjustable mortgages that were reset in the first few months of this year may have already been a victim of a repossession or are already in the middle of the foreclosure process.

On average a typical foreclosure proceeding starts after the monthly mortgage payment is three months past due. If a homeowner cannot negotiate with their bank or lender for a cheaper loan they can fall into foreclosure about four months following the initial ninety day period of delinquency.

Therefore, homeowners who have had their loan rates reset during January may lose their homes by this summer. Also, any homeowners that have had their loans reset after January may fall into foreclosure long before the assistance program of the FHA goes into effect. Even those who have had their mortgage rates reset this month may be in the same situation.

The foreclosure bill will probably only help those who will have their mortgages reset during the third quarter of this year and later. Unfortunately those who had their mortgage rates reset and at the beginning of this year will not be able to be helped.

There are some states where it takes a year to complete the foreclosure process so some homeowners who have had their mortgage rates reset and the beginning of the year may still be able to get help if the foreclosure program becomes law.