Post by unlawflcombatnt on Aug 31, 2007 3:21:13 GMT -6
from the Washington Post
Bush to Offer Proposals To Ease Mortgage Crisis
By Neil Irwin and Dina ElBoghdady
8/31/07
"The Bush administration today will propose a set of policies meant to help ease the wave of mortgage defaults, according to senior administration officials. It is the administration's first broad effort to deal with the rising number of home foreclosures, which are widely forecast to increase in the next year.
President Bush and Treasury Secretary Henry M. Paulson Jr. will propose changes to the Federal Housing Administration mortgage insurance program that would allow more people to refinance with FHA insurance if they fall behind on adjustable-rate mortgages, which offer low introductory rates that can later rise, sometimes doubling a monthly payment.
People who have missed mortgage payments are now ineligible for FHA insurance. In the president's plan, they would be eligible if they fall behind only because the amount they are required to pay each month increases, as is now happening with many mortgages issued from 2004 to 2006.
The officials said the administration can make the change without congressional approval, but other details will require legislation....
a senior administration official....estimated that the change would allow 80,000 more homeowners to receive federally insured mortgages in 2008 on top of the 160,000 already projected to use the program.
The FHA does not make loans, it insures them. That helps lower the cost of mortgages for borrowers and makes the loans less risky for lenders. The agency has $22 billion in reserve to cover defaults.....
the administration would ease a requirement that people refinancing into an FHA insured loan must have 3 percent equity in their houses. That way, people who are upside down on their mortgages -- meaning they owe more than the house is worth -- can still refinance into an FHA mortgage.
Bush also wants to raise the limit on the size of loans that the FHA can insure, which is $362,000 in states with high home prices. The proposal would move the limit to $417,000 in those high-price states, the same amount that federally chartered entities such as Freddie Mac and Fannie Mae can purchase. But the administration is not seeking to expand the ability of Freddie Mac and Fannie Mae to purchase loans, despite calls from some in Congress to do so....
Bush will also ask Congress to temporarily change the tax laws to make it easier for mortgage lenders to renegotiate loan terms with borrowers. If a homeowner is unable to make payments and the value of its house has dropped, its lender may want to renegotiate the loan so that the borrower owes less. A mortgage provider would, in many cases, prefer to reduce a $100,000 loan to $80,000 rather than have to foreclose on the house and try to sell it.
However, under current law, the borrower must treat the $20,000 reduction in the amount owed as income, increasing tax liability at the end of the year.
The Bush administration will ask Congress to alter the laws so that the $20,000 would not be counted as income...."
Bush to Offer Proposals To Ease Mortgage Crisis
By Neil Irwin and Dina ElBoghdady
8/31/07
"The Bush administration today will propose a set of policies meant to help ease the wave of mortgage defaults, according to senior administration officials. It is the administration's first broad effort to deal with the rising number of home foreclosures, which are widely forecast to increase in the next year.
President Bush and Treasury Secretary Henry M. Paulson Jr. will propose changes to the Federal Housing Administration mortgage insurance program that would allow more people to refinance with FHA insurance if they fall behind on adjustable-rate mortgages, which offer low introductory rates that can later rise, sometimes doubling a monthly payment.
People who have missed mortgage payments are now ineligible for FHA insurance. In the president's plan, they would be eligible if they fall behind only because the amount they are required to pay each month increases, as is now happening with many mortgages issued from 2004 to 2006.
The officials said the administration can make the change without congressional approval, but other details will require legislation....
a senior administration official....estimated that the change would allow 80,000 more homeowners to receive federally insured mortgages in 2008 on top of the 160,000 already projected to use the program.
The FHA does not make loans, it insures them. That helps lower the cost of mortgages for borrowers and makes the loans less risky for lenders. The agency has $22 billion in reserve to cover defaults.....
the administration would ease a requirement that people refinancing into an FHA insured loan must have 3 percent equity in their houses. That way, people who are upside down on their mortgages -- meaning they owe more than the house is worth -- can still refinance into an FHA mortgage.
Bush also wants to raise the limit on the size of loans that the FHA can insure, which is $362,000 in states with high home prices. The proposal would move the limit to $417,000 in those high-price states, the same amount that federally chartered entities such as Freddie Mac and Fannie Mae can purchase. But the administration is not seeking to expand the ability of Freddie Mac and Fannie Mae to purchase loans, despite calls from some in Congress to do so....
Bush will also ask Congress to temporarily change the tax laws to make it easier for mortgage lenders to renegotiate loan terms with borrowers. If a homeowner is unable to make payments and the value of its house has dropped, its lender may want to renegotiate the loan so that the borrower owes less. A mortgage provider would, in many cases, prefer to reduce a $100,000 loan to $80,000 rather than have to foreclose on the house and try to sell it.
However, under current law, the borrower must treat the $20,000 reduction in the amount owed as income, increasing tax liability at the end of the year.
The Bush administration will ask Congress to alter the laws so that the $20,000 would not be counted as income...."