208,078 New Listings - November 2009 - Last update November 20, 2009 12:30 PM EST 
U.S. Senate Moves To Limit Future Foreclosures
Last week, the U.S. Senate passed legislation that will expand America’s biggest federal homeownership program and thereby aid sub prime borrowers in their efforts to avoid foreclosure. The bill gained Senate approval by a vote of 93-1. It will free-up tight underwriting standards and also raise the maximum limit for loans insured by the Federal Housing Adminstration (FHA). According to an FHA spokesman, the bill should help more than 200,000 borrowers save their homes.
The House of Representatives passed its own version of the reform in late November. As it now stands, some compromise between the House and Senate bills will have to be made before a final vote in both chambers can send the legislation to President Bush for signature.
In a separate move, the Senate approved a program that would provide tax relief for consumers successfully restructured their mortgage loans to avoid foreclosure, as well as for those who have already been foreclosed. Under the current law, when a lender either forgives or cancels a mortgage, the financial relief the homeowner obtains is taxable as income and is added to his or her earnings for the year. Like a typical Catch-22, families struggling to reduce their mortgage debt are hit by taxes arising from debt forgiveness by the lender. The House approved this plan way back in October, but the Senate altered it so that any financial relief ends after three years. It now goes back to the House for re-approval.
More than 1.8-million homeowners who took sub prime adjustable rate mortgages during the housing boom that came to a halt in late 2005, have now been anticipating home foreclosure as their loans fast approach interest rate increases that will dramatically increase their monthly payments to amounts beyond their ability to pay. When the new bills pass and become law, many homeowners will have good reason to rejoice.
Many troubled homeowners will not be able to benefit from the FHA program because their homes are valued above the current FHA $362,000 loan limit. This maximum loan limit means very few borrowers in high property value states like California can find any relief.
The bill just passed by the U.S. Senate would hike the current loan limit from $362,000 to $417,000 which is equal to the same maximum loan limit that mortgage finance companies Fannie Mae and Freddie Mac are bound by. The house bill would lift the loan limit as high as $829,750 in some high-cost areas. Raising this loan limit could give a nice boost to the housing industry in California and a few other states.
The compromise between both chambers might prove difficult to reach because there is a question as to whether the FHA add to a new housing trust fund that would be established under the provisions of the new House bil. The Senate bill has no such provision.
Whatever compromise is reached, it seems clear that it better take place sooner rather than later based upon the current statistics about anticipated foreclosures in early 2008.
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My sister had a solid respectable mortgage loan for her home in Ft. Worth. She has had sever medical problems in the last eighteen months and spent all of last year appealing her insurance company for denying disability. Meantime, she has lost all her possessions, most of her retirement savings, and her job. She owes family members thousands. Now, she needs to sell her home to afford cobra insurance. A recent call to a “non-profit” mortgage counseling organization (refered by her mortgage co.) resulted in a letter suggesting that she give up her health insurance for mortgage payments. Of course the house isn’t selling because of the massive number of sub-prime foreclosures coming onto the market.
There must be tens of thousands of home owners trying to sell their homes to get out of dire situations due to no fault of their own. Our government needs to apply the same bail-out standards to individual homeowners as it did to all institutions related to BearStearns.