Federal program will offer mortgage help to many
Tuesday, November 11, 2008 6:04 PM
By Steve Wartenberg
THE COLUMBUS DISPATCH
Hundreds of thousands of homeowners behind on their mortgages may be able to hold on to their houses with the help of a new federal program.
A far-reaching plan was announced today to assist homeowners by speeding up the process to modify delinquent loans held by Fannie Mae and Freddie Mac, which own or guarantee nearly 31 million U.S. mortgages, or nearly six of every 10 outstanding.
The plan, put forward by the Federal Housing Finance Agency, begins Dec. 15, but government officials did not have an estimate of how many people would qualify for the new program.
"I think this announcement (by the agency) really complements what we announced on Oct. 31," said JPMorgan Chase spokesman Jeff Lyttle of the bank's initiative to modify 400,000 mortgages.
Chase is one of the largest holders of Fannie Mae and Freddie Mac mortgages.
"Is this enough?" Lyttle said of the loan-modification programs offered by the housing agency, Chase and other megabanks in recent weeks. "Probably not, but it's a terrific start."
Two local consumer advocates are concerned the government's program does not go far enough or address one of the root causes of the mortgage meltdown: a nationwide reduction in home values.
"I have my doubts it will work," said Paul Bellamy, an attorney with the Equal Justice Foundation in Columbus.
He said homes are now worth a lot less than their purchase price and "trying to support a house now worth $140,000 with a $200,000 mortgage is not realistic" even if the mortgage is modified by the new federal program.
To qualify for the program, borrowers would have to be at least three months behind on their home loans, and would need to owe 90 percent or more than the home is currently worth.
Investors who do not occupy their homes would be excluded, as would borrowers who have filed for bankruptcy.
Borrowers would get help in several ways: a reduction in interest rates so they won't pay more than 38 percent of their income on housing expenses; an extension of loans from 30 years to 40 years; and the ability to defer some of the principal interest-free.
"I think that writing down the principal is an avenue that needs to be in the arsenal of options," said Richard Call, vice president of Columbus-based Consumer Credit Counseling Services.
The government's plan, he said, does not do this. Call also said rising unemployment is making it more difficult to deal with the problem of toxic subprime loans.
"If a husband or a wife has lost their job they won't have the wherewithal to make a slightly reduced payment," he said, adding he favors a 90- or 120-day moratorium on all foreclosures to "buy these people some time."
Bellamy said there is no financial incentive for mortgage service holders to reduce the principal amount of a loan and it is still in their financial interest to push the loan through to foreclosure and recoup as much as possible through a sheriff's sale.
"Someone has to come in and say these mortgages are doing social harm and and reduce the obligation forever," he said, adding homeowners, mortgage service holders and financial institutions that invested in mortgage-backed securities should share in this write-down.
More than 4 million American homeowners, or 9 percent of borrowers with a mortgage, were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.
"Foreclosures hurt families, their neighbors, whole communities and the overall housing market," said James Lockhart, director of the Federal Housing Finance Agency. "We need to stop this downward spiral."
Today's announcement coupled with recent and more aggressive strategies from the major retail banks are important steps to fix the housing crisis, experts said.
Citigroup announced late Monday that it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments.
Citi also plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are on the verge of falling behind. This represents about one-third of all the mortgages that Citigroup owns, the bank said.
Bank of America will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement.
Information from the Associated Press was used in this story.
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Tuesday, November 11, 2008 6:04 PM
By Steve Wartenberg
THE COLUMBUS DISPATCH
Hundreds of thousands of homeowners behind on their mortgages may be able to hold on to their houses with the help of a new federal program.
A far-reaching plan was announced today to assist homeowners by speeding up the process to modify delinquent loans held by Fannie Mae and Freddie Mac, which own or guarantee nearly 31 million U.S. mortgages, or nearly six of every 10 outstanding.
The plan, put forward by the Federal Housing Finance Agency, begins Dec. 15, but government officials did not have an estimate of how many people would qualify for the new program.
"I think this announcement (by the agency) really complements what we announced on Oct. 31," said JPMorgan Chase spokesman Jeff Lyttle of the bank's initiative to modify 400,000 mortgages.
Chase is one of the largest holders of Fannie Mae and Freddie Mac mortgages.
"Is this enough?" Lyttle said of the loan-modification programs offered by the housing agency, Chase and other megabanks in recent weeks. "Probably not, but it's a terrific start."
Two local consumer advocates are concerned the government's program does not go far enough or address one of the root causes of the mortgage meltdown: a nationwide reduction in home values.
"I have my doubts it will work," said Paul Bellamy, an attorney with the Equal Justice Foundation in Columbus.
He said homes are now worth a lot less than their purchase price and "trying to support a house now worth $140,000 with a $200,000 mortgage is not realistic" even if the mortgage is modified by the new federal program.
To qualify for the program, borrowers would have to be at least three months behind on their home loans, and would need to owe 90 percent or more than the home is currently worth.
Investors who do not occupy their homes would be excluded, as would borrowers who have filed for bankruptcy.
Borrowers would get help in several ways: a reduction in interest rates so they won't pay more than 38 percent of their income on housing expenses; an extension of loans from 30 years to 40 years; and the ability to defer some of the principal interest-free.
"I think that writing down the principal is an avenue that needs to be in the arsenal of options," said Richard Call, vice president of Columbus-based Consumer Credit Counseling Services.
The government's plan, he said, does not do this. Call also said rising unemployment is making it more difficult to deal with the problem of toxic subprime loans.
"If a husband or a wife has lost their job they won't have the wherewithal to make a slightly reduced payment," he said, adding he favors a 90- or 120-day moratorium on all foreclosures to "buy these people some time."
Bellamy said there is no financial incentive for mortgage service holders to reduce the principal amount of a loan and it is still in their financial interest to push the loan through to foreclosure and recoup as much as possible through a sheriff's sale.
"Someone has to come in and say these mortgages are doing social harm and and reduce the obligation forever," he said, adding homeowners, mortgage service holders and financial institutions that invested in mortgage-backed securities should share in this write-down.
More than 4 million American homeowners, or 9 percent of borrowers with a mortgage, were either behind on their payments or in foreclosure at the end of June, according to the most recent data from the Mortgage Bankers Association.
"Foreclosures hurt families, their neighbors, whole communities and the overall housing market," said James Lockhart, director of the Federal Housing Finance Agency. "We need to stop this downward spiral."
Today's announcement coupled with recent and more aggressive strategies from the major retail banks are important steps to fix the housing crisis, experts said.
Citigroup announced late Monday that it is halting foreclosures for borrowers who live in their own homes, have decent incomes and stand a good chance of making lowered mortgage payments.
Citi also plans to reach out to 500,000 homeowners who are not currently behind on their mortgage payments, but who are on the verge of falling behind. This represents about one-third of all the mortgages that Citigroup owns, the bank said.
Bank of America will modify an estimated 400,000 loans held by newly acquired Countrywide Financial Corp. as part of an $8.4 billion legal settlement.
Information from the Associated Press was used in this story.
[email protected]
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