New FHA plan to assist homeowners

On Friday August 31, 2007 President Bush announced a set of proposals to change the Federal Housing Administration (FHA) to address the sub-prime mortgage market crises that have shaken homeowners and Wall Street.

Bush's proposals are intended to allow certain borrowers to refinance more easily out of higher monthly payments following the reset of an adjustable-rate mortgage (ARM) and into a loan backed by the FHA.

Bush also proposed a change in the tax code to allow homeowners to forego paying taxes on forgiven debt in loans being restructured by financial institutions.

The changes are to take effect immediately for an estimated 60,000 homeowners believed to be eligible for the new refinancing program known as FHA Secure.

"It's not the government's job to bail out speculators or those who made the decision to buy a home they knew they could never afford," said Bush.

To qualify, the homeowner must have 3% equity in their home and demonstrate that the original loan was being paid on a timely basis until the reset.

Until now, FHA had refused to guarantee refinanced loans for borrowers who are currently delinquent on their mortgage.

Bush called on Congress to overhaul legislation to the raise the FHA loan limits in order to assist more homeowners. The current limit in most states is $202,000.

A number of Democrats, both in Congress and on the Presidential campaign trail, applauded Bush’s proposals, but said that the efforts do not go nearly far enough.

The FHA estimates 500,000 homes could go into foreclosure. FHA believes it will only be able to assist about 250,000 with its current FHA programs.

If you feel you need help with your mortgage and need to refinance, call Matt at 702-526-3133 or 1-866- 427-6375