About Government Refinance and Home Purchase Programs

Information and Updates on Government Mortgage Programs
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The Democrats succeeded in getting some items in the new big bailout bill designed to help struggling homeowners. Here is a paragraph from the summary page of the proposed bill:

II. Homeownership Preservation

EESA requires the Treasury to modify troubled loans – many the result of predatory lending practices – wherever possible to help American families keep their homes. It also directs other federal agencies to modify loans that they own or control. Finally, it improves the HOPE for Homeowners program by expanding eligibility and increasing the tools available to the Department of Housing and Urban Development to help more families keep their homes.

That sounds like good news. The government is about to buy a lot of mortgages so they ought to have some say about who gets to participate in the new HOPE loans right? Here are some more details from the section by section summary page. These are the section headers of most interest here:

Section 109. Foreclosure Mitigation Efforts.
For mortgages and mortgage-backed securities acquired through TARP, the Secretary must implement a plan to mitigate foreclosures and to encourage servicers of mortgages to modify loans through Hope for Homeowners and other programs. Allows the Secretary to use loan guarantees and credit enhancement to avoid foreclosures. Requires the Secretary to coordinate with other federal entities that hold troubled assets in order to identify opportunities to modify loans, considering net present value to the taxpayer.

Section 110. Assistance to Homeowners.
Requires federal entities that hold mortgages and mortgage-backed securities, including the Federal Housing Finance Agency, the FDIC, and the Federal Reserve to develop plans to minimize foreclosures. Requires federal entities to work with servicers to encourage loan modifications, considering net present value to the taxpayer.

Section 124. Hope for Homeowners Amendments.

Strengthens the Hope for Homeowners program to increase eligibility and improve the tools available to prevent foreclosures.

Finally, here is a link to the actual 110 page bill. And here are some relevant quotes from the document that could become law as soon as this Wednesday.

SEC. 109. FORECLOSURE MITIGATION EFFORTS.
2 (a) RESIDENTIAL MORTGAGE LOAN SERVICING
3 STANDARDS.—To the extent that the Secretary acquires
4 mortgages, mortgage backed securities, and other assets
5 secured by residential real estate, including multifamily
6 housing, the Secretary shall implement a plan that seeks
7 to maximize assistance for homeowners and use the au8
thority of the Secretary to encourage the servicers of the
9 underlying mortgages, considering net present value to the
10 taxpayer, to take advantage of the HOPE for Home11
owners Program under section 257 of the National Hous12
ing Act or other available programs to minimize fore13
closures.

SEC. 110. ASSISTANCE TO HOMEOWNERS.
(1) IN GENERAL.—To the extent that the Fed2
eral property manager holds, owns, or controls mort3
gages, mortgage backed securities, and other assets
4 secured by residential real estate, including multi5
family housing, the Federal property manager shall
6 implement a plan that seeks to maximize assistance
7 for homeowners and use its authority to encourage
8 the servicers of the underlying mortgages, and con9
sidering net present value to the taxpayer, to take
10 advantage of the HOPE for Homeowners Program
11 under section 257 of the National Housing Act or
12 other available programs to minimize foreclosures.

The last one is a little hard understand but the upshot is that the new act is loosening the standards for the Hope For Homeowners loans (aka HOPE loans, aka FHA short refinances).

See these changes in the context of the existing law here.

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