Appropriately named "Hope for Homeowners Act of 2008" the massive effort to help distressed homeowners, many whom were caught up in sub prime lending over the past few years, is scheduled to begin in October 2008. The act authorizes the insurance of up to $300 million in mortgages and is expected to help approximately 400,000 homeowners.
The effort is backed by the Federal Housing Administration (FHA) who will refinance distressed loans at a significant discount for owner-occupants at risk of losing their homes through foreclosure. Built on the idea, expressed by Federal Reserve Chairman Bernanke, that creating new equity for troubled homeowners is likely to be a more effective way to avoid foreclosure, the program will require investors and lenders of existing loans who volunteer to participate in the massive operation to take significant losses in order to receive proceeds from the loans refinanced with government insurance. The rationale for the lenders is that they will take less of a loss than they would if the loans went into foreclosure.
An additional requirement of the act requires borrowers to share new equity and future appreciation equally with FHA. This obligation will continue until the borrower sells the home or refinances the mortgage.
The program will be overseen by a board of high level government officials, who will be allowed to develop and monitor standards of operation to enhance the possibility of success for this innovative effort to solve the mortgage woes currently gripping our nation.
For additional information on the Hope for Homeowners Act of 2008, you can contact me at (210) 681-5252.