White House Expands FHA Housing Aid
In an effort to keep the reeling housing market from sliding further off the map and possibly to another steep drop off, the Obama administration announced a $14 billion expansion of the Troubled Asset Relief Program aimed at reducing mortgage dept for under water barrowers. The new plan will cap mortgage dept at 115% of a home’s value and allow for financing thru the Federal Housing Administration.
Complaints that the President’s recovery plan helped bail out Wall Street but did little to ease the pain of Main Street continue to motivate the administration and ultimately resulted in this second round of aid to homeowners facing foreclosure throughout the country.
According to U.S. banking regulators, delinquent mortgages increased 14% in the last quarter of 2009 as a result of a major increase in the number of significantly past due barrowers with good credit.
This new initiative is a departure from the previous efforts which attempted to lower home loan interest rates for the subprime mortgage category of barrowers trying to remain in their homes in the face of impending foreclosures.
The new expansion seeks to assist unemployed workers and homeowners in parts of the country where home values have decreased to the point where it is beginning to make more financial sense for the home owner to simply walk away.
About 6 million homeowners have missed at least two months of payments. And experts warn that 10 million to 12 million borrowers are in danger of foreclosure over the next three years.
The new efforts also include three to six months of assistance for unemployed workers and incentives for mortgage companies to reduce principal balance for these individuals.
To qualify for the program, barrowers need to have a mortgage of less than $729,750, be able to prove that they are in financial trouble, and be spending at least 31% of their pretax income on their mortgage.
The program is modeled after the plan announced by Bank of America to offer up to $3 billion in forgiveness to upwards of 40,000 struggling homeowners over their heads.