Congressmen Frank and Dodd have a plan to use FHA to further help distressed homeowners. Here is an excerpt from a recent Reuters article on the subject:
Under the proposed program, a lender or mortgage holder which agrees to reduce the principal of a troubled loan could get a payment from the proceeds of a new FHA-insured loan, if the restructured loan would result in terms the borrower could reasonably be expected to pay, Frank said.
The original lender or mortgage holder would get a cash payment and no further exposure to the borrower, he said.
Borrowers or loan servicers could contact an FHA-approved lender, which would determine the size of a loan that would fit the program and the borrower’s ability to repay.
“If the current lender or mortgage holder agrees to a write-down that is sufficient to meet the requirements of the program and make the new loan affordable, the FHA-lender will pay off the discounted existing mortgage,” he said.
