Posted by: Nathan Gruwell | August 12, 2009


Great news for those of you thinking about reducing your monthly payment. Call or email me for more details. Read on….

The Obama administration plans to announce Thursday new guidelines designed to help struggling homeowners with Federal Housing Administration-insured mortgages.

The guidelines implement changes enacted by Congress in May to bring the FHA’s loan-modification program more in line with the White House’s foreclosure-prevention plan. The Obama plan, announced in February, provides financial incentives for mortgage companies to reduce loan payments to affordable levels.

The FHA doesn’t have an estimate of how many borrowers are likely to be helped by the new program, said a spokeswoman for the Department of Housing and Urban Development, which is announcing the guidelines. Some 14.2% of FHA loans are at least 30-days past due and not yet in foreclosure, according to LPS Applied Analytics.

FHA Commissioner David Stevens said the changes “offer borrowers an opportunity to stay in their homes, make payments that are manageable and defer [payment of] the money owed to a later time when, hopefully, home values have improved.”

Like the broader Obama program, the FHA plan seeks to reduce mortgage-related payments to 31% of monthly income. But it gets there in a different way, by focusing on changes in the principal amount rather than the interest rate.

Under the FHA plan, mortgage servicers can reduce the amount of principal on which the borrower must make loan payments by as much as 30% to get monthly payments to affordable levels. The borrower makes the reduced payments for the life of the loan, but is responsible for paying off the full loan amount when the home is sold or the loan is refinanced. This approach is designed to fit guidelines set by Congress, FHA officials said.

The need to bolster the FHA program was one of the many issues discussed at Tuesday’s meeting between Obama administration officials and executives from 25 mortgage companies who were summoned to Washington this week to discuss efforts to improve and speed up implementation of the administration’s housing rescue plan.

Under the new guidelines, FHA borrowers can receive a loan modification after they have missed one loan payment, rather than waiting until they are at least three payments late, as in the past. This is different from the Obama program, which allows borrowers who are at risk of default to get help, even if they are current on their loan. The FHA can’t offer similar help to at-risk borrowers, officials said, because it would run afoul of contracts with investors who buy GNMA securities, bonds made up of FHA and other government-backed loans.

Mortgage servicers will receive incentive fees of as much as $1,250 for each successful modification. FHA officials said they expect the approach to save the government money by reducing foreclosure-related losses on loans the government insures.Y

Taken from WSJ. For complete article:


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