How Can the FHA Loan Program Help You Save Your Home From Foreclosure?
Many homeowners unfortunately seem to believe that the government’s new foreclosure relief programs are designed to help them keep their homes and obtain more manageable monthly payments. The reality is, however, that the requirements borrowers must meet to qualify for assistance from the federal government make the programs a cure worse than the initial problem.
And while these programs have received much positive press, the terms offered on the loans provided by the government under the FHA Hope for Homeowners Act are almost predatory in nature, and it is doubtful most borrowers will take the time to realize just what they are getting into. In fact, it is more difficult for borrowers to qualify for an FHA Hope for Homeowners loan that it is for Wall Street firms to receive billions of dollars in direct investment from the bailout program.
For over a year now, home values have been decreasing in large parts of the nation, with areas hit hard by foreclosures suffering more than others. But the FHA requires that homeowners convince their lenders to accept only ninety percent of the current fair market value of the home in order to qualify. In some housing markets, this may necessitate a 30-40% writedown of the mortgage balance, which most banks will not want to recognize.
With the bailout program proceeding, though, the government may become the owner of some of these defaulted mortgages, which may make it slightly easier to qualify for the FHA plan. The government has stated it will attempt to buy mortgage backed securities at a discount, so if it can convince lenders to sell for less than the fair market value of the securities, it may be more plausible for the government to help homeowners qualify for assistance by meeting this requirement.
Another problem for homeowners with subprime mortgages in foreclosure is that the second mortgage must be completely paid off or otherwise disposed of before the FHA will fund the loan. This can be extremely difficult to resolve, as many 80/20 loans were made during the real estate boom, and it is quite unreasonable to expect that a family in foreclosure would be able to pay off 20% of the value of their home just to qualify for another program to help stop foreclosure for good.
Also, the government and banks have worked together to depress the housing market throughout the country and is now blatantly trying to cash in when prices begin to rise again. Homeowners who participate in the Hope for Homeowners plan must split any proceeds of selling the home with the FHA. The government will be able to take up to 90% of any increase in the value of the property that homeowners otherwise would have enjoyed.
Income and debt ratios are also fairly strict under the FHA plan, and the program has a 1.5% insurance payment that must be paid every month for the life of the loan. This can raise the monthly payment over an affordable limit for many homeowners, who are then locked into their house and unable to sell to save the house later on because the government would receive most of the proceeds anyway.
While some borrowers may receive a benefit from the FHA plan, it would be difficult to imagine how such a program could help large numbers of borrowers save their homes with a more affordable, reasonable mortgage. It is only slightly better than a typical hard money loan, and if homeowners can convince their mortgage companies to write down the value of the mortgage by 30-40%, then they can almost certainly convince a foreclosure lender or hard money lender to fund a loan with poor terms, similar to the FHA program.
Author: Nick Adama
Article Source: EzineArticles.com
Provided by: US Dollar credit card