President George W. Bush announced a series of
proposals intended to help homeowners faced with mortgage
defaults and Federal Reserve Chairman Ben
Bernanke told a group of bankers in Jackson Hole,
Wyoming that, while the Feds were not about to
rescue Wall Street or shield investors from
self-inflicted loses, the committee will monitor
the situation and act as needed to limit the
damages to the broader economy that may grow out
of disruptions in the financial markets.
There is wide speculation that the Fed
will cut its rate for overnight federal
funds by at least a quarter point at its next
meeting in mid-September and Bernanke’s remarks
were interpreted as further signaling such a move.
The President announced his program while
insisting that the U.S. economy was healthy and
that subprime market problems were affecting only
a small part of the overall economy.
The President called on Congress to pass
Federal Housing Administration (FHA)
Modernization Legislation which would
permit lower down payments, allow FHA to insure
bigger loans, and give it more pricing
flexibility. These reforms, the President said,
would allow FHA to help more families buy homes
and offer more options to homeowners looking to
refinance existing mortgages.
The administration will also launch a new FHA
Initiative Called "FHA-Secure"
designed to help people with good credit but who
have not made all of their payments on time
because of rising mortgage payments. FHA would be
able to offer many of these homeowners an option
to refinance existing mortgages so they can make
their payments and keep their homes. FHA will also
charge mortgage insurance premiums based on the
individual risk of each loan, using traditional
underwriting standards, so it can expand access
and help even more families.
Bush asked Congress to change a provision of
the federal tax code that counts cancelled
mortgage debt on primary residences as taxable
income. In the event of a short sale or a
foreclosure, if the mortgage company recoups less
than it is owed and that amount is forgiven,
present tax code treats it as taxable income. The
President proposes temporary relief to ensure that
cancelled mortgage debt on a primary residence is
not counted as income.
The President said he had asked Housing and
Urban Development Secretary Alphonso Jackson and
Treasury Secretary Henry Paulson to reach out to
groups that offer foreclosure counseling and
refinancing - community organizations like
NeighborWorks, mortgage lenders and loan servicers,
FHA, and Government-Sponsored Enterprises like
Fannie Mae and Freddie Mac - with the goal of
expanding mortgage financing options, identifying
homeowners before they face hardships, and helping
them understand their financing options and find
an appropriate mortgage product.
Bush also cited other programs that the federal
government is initiating or backing:
- Improving disclosure requirements so
homeowners receive complete, accurate, and
understandable information about their
mortgages.
- Strengthening mortgage lending standards.
- Reforming the Real Estate Settlement
Procedures Act (RESPA) to promote comparative
shopping by consumers for the best loan terms,
provide clearer disclosures, limit settlement
cost increases, and require fee disclosure.
- Supporting state-based efforts to toward
comprehensive mortgage broker registration.
- Pursuing wrongdoers and predatory lenders to
ensure they are punished. HUD, the Department
of Justice, the Federal Trade Commission, and
others, are aggressively pursuing this
program.
- Encouraging financial literacy with the help
of leading private sector individuals.
- Inclusion in the president's Budget of $120
million for NeighborWorks, which provides
foreclosure workshops and counseling to
borrowers and $50 million for HUD's housing
counseling program.
- The President's Working Group On Financial
Markets, led by Treasury Secretary Paulson and
representatives of the Federal Reserve,
Securities and Exchange Commission, and the
Commodity Futures Trading Commission is
examining some of the broader market issues
underlying the recent mortgage problems
including the role of credit rating agencies
and how their ratings are used in lending
procedures, and how securitization, the
repackaging and selling of assets, has changed
the mortgage industry and related business
practices.
Newsletter information courtesy
of Mortgage News Daily
The purpose of this
newsletter is not to give advice. The purpose is
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The loan professional that has made this
information available specializes in equity
repositioning solutions for those buying, selling
or refinancing real estate. |
