Bush Steps In To Help Out With Family Mortgages

President Bush announced that his administration would be providing more mortgage assistance for borrowers with subprime loans at risk of foreclosure. This help will invigorate economic growth and stem the oncoming recession while breaking the house depreciation cycle in communities across the nation.

How The New FHA Plan Helps Family Mortgages

With this new plan, HUD and the Federal Housing Administration (FHA) will have more flexibility when it comes to mortgage assistance, such as borrowers with late payments or those who received voluntary mortgage principal write-downs.

The growth of FHASecure means more homeowners in trouble with lenders and the high costs of subprime loans will receive help. Around 500,000 families will be able to refinance into FHA-insured mortgages at a prime rate by the end of the year. “We want to be able to help families who are in the right house, but the wrong mortgage,” said Federal Housing Commissioner-Assistant Secretary for Housing Brian D. Montgomery. Although the FHA has already modified its refinancing program last summer, the criteria for eligibility will expand to include more people.

Qualifying For FHA Mortgage Refinancing

To qualify for refinancing, borrowers must have been late on two consecutive monthly mortgage payments or at two separate times during the last year. Those who missed three payments will need a 90 percent LTV ratio for refinancing, while those who missed two will have a 97 percent LTV ratio.

Besides helping families turn to other refinancing options, the FHASecure expansion will also give lenders an alternative to foreclosure. Mortgage companies can write down outstanding subprime mortgage balances to a LTV ratio and persuade lenders to try out other options than foreclosure, like subordinate financing for in between the current loan and the FHA-insurable loan.

How FHA Loans Will Work With Mortgages Now

By insuring mortgages at an affordable rate in exchange for equity, the FHA’s insurance fund will be protected, along with taxpayers, against risk. New FHASecure loans will also meet its stricter underwriting standards, with lenders making sure that borrowers can repay their mortgages and give proof of good credit, employment and income verification. Additionally, borrowers will have to pay the annual premiums, which will contribute to the FHA insurance fund.

The best part is that FHASecure borrowers save about $400 a month on average when compared to other subprime loans. “The modifications to the existing FHASecure product offer a prudent, yet appropriate, way to help more families refinance without putting the government or taxpayers at risk,” said Montgomery. After pumping almost $68 billion in mortgages into the housing market since last September, the FHA remains a wise choice for those looking to solve the problem of mortgage payments in subprime loans.