About Government Refinance and Home Purchase Programs

There was a pretty good article over at the Christian Science Monitor about how long getting the new FHA short refi, aka “HOPE loan” program up and running will take. Here are some excerpts:

With more than 2 million foreclosures expected this year, who will be saved?

The short answer: This year, very few people.

Groups that help financially strapped homeowners are warning that the rules governing the new federal rescue may not be ready until October. Moreover, by the time the federal government gets ramped up, help may not be forthcoming until next year. That may be too late for the 1.8 million people who entered foreclosure proceedings in the first half of the year.

“The bottom line is [that] the full set of eligibility is not yet developed,” says Jim Carr, chief operating officer of the National Community Reinvestment Coalition in Washington. “Once the details are fleshed out, it will take months to ramp up and train people.” The idea is to help troubled borrowers who took out loans before Jan. 1, 2008. A homeowner has to be able to afford a loan worth 87 percent of the appraised value of his or her primary home. Just as important, the lending bank must agree to take a loss on the loan, which then becomes part of a federal portfolio, in essence owned by the Federal Housing Administration (FHA). The homeowner also must agree to split profits with Uncle Sam if the home rebounds in value and is sold.

“Implementation will be the biggest challenge,” says Sharon Price, director of policy at the National Housing Conference, a solution-oriented nonprofit based in Washington. “For example, it’s up to the lenders whether or not they want to participate.”

…

Mr. Tisler says his organization, which negotiates with mortgage servicers on behalf of financially strapped homeowners, is still not seeing enough of an interest by the banks in writing down the principal amount owed. Instead, he says, many banks would rather tack arrearages onto the back of a loan.

On Wednesday, Hope Now, a private-sector alliance of mortgage services, investors, and counselors, said it completed in June 181,000 workouts of loans to prevent foreclosure. In the past year, the group reports preventing 1.9 million loans from being foreclosed. More than half of the workouts were subprime loans – that is, loans made to people with less-than-stellar credit.

Faith Schwartz, executive director of Hope Now, says some solutions do involve tacking on missed payments. But “at the end of the day,” she says, “the payments are meant to be affordable.”