by Amy Lillard
Oct 2, 2008 - The Federal Housing Administration program announced and passed this summer officially rolled out this week with the backing of the Bush administration. Lenders will begin processing the details over the next few days, if they choose to participate.
The details, which until now were restricted by law from full disclosure, spell out a plan that will enable homeowners to refinance into more affordable, government-backed mortgages and stave off foreclosure. The program will insure up to $300 billion in mortgages, helping thousands of borrowers strapped with increasing bills and unrealistic interest rates.
The Congressional Budget Office estimates this plan, called the “Hope for Homeowners” programs, could help 400,000 people during the three-year time period. Critics have long contended that this is merely a symbolic gesture and not a long-ranging, comprehensive solution. Some housing advocates cite the fact that foreclosures are now reaching 300,000 filings a month.Final participation numbers will be determined by lenders, who have the option to participate in the program. Program details are as follows:
Depending on lender participation, these homeowners can refinance into a 30-year, fixed-rate loan, one that will probably be at a better interest rate. The FHA will insure the loan for 90 percent of the home's current value.
Besides the limited scope of the program, critics are also worried about these last stipulations, as lenders have resisted forgiving debt in the past. Lenders instead prefer to lower interest rates or rearrange payment schedules. But government officials are hoping that with this new formal program, lenders will be encouraged to accept these new arrangements and avoid the hassles of foreclosure.
Borrowers interested in more information can go to http://www.fha.gov or call 800-CALL-FHA.
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