A bipartisan bill introduced in the
House of Representatives this past week would require regulators to craft
principal reduction programs for government-backed mortgages.
Reps. Gary Peters, D-Mich., John
Campbell, R-Calif., and Keith Ellison, D-Minn. sponsored the Preserving
American Homeownership Act of 2012. More than 11 million borrowers owe more on
their mortgage than their house is worth.
The bill directs the Federal Housing
Finance Agency and the Department of Housing and Urban Development to develop
pilot programs that allow write-downs on Fannie Mae,
Freddie
Mac and Federal Housing Administration loans.
Mortgage servicers would reduce
enough principal to get the borrower down to a 115% loan-to-value ratio,
according to the bill. If the homeowner stays current for three years, the servicer
can make additional reductions to a 95% LTV, bringing the borrower back to
positive equity.
Now the bill would require borrowers
to share up to 50% of any appreciation in value with the GSE or FHA if the home is sold or refinanced.
Net present value tests must show an
eligible borrower for such a program would be in
such danger of foreclosure or so deeply underwater that other modifications and
even forbearance aren't enough.
The FHFA continues to analyze
allowing the GSEs to participate in an expanded HAMP option for principal reduction. The savings,
early analysis found, could be easily offset by borrowers who strategically default to
take advantage when they otherwise could have remained current on the loans.
Some servicers like Ocwen Financial
began shared-appreciation programs, but others may need months to develop the
ability to handle such modifications.
Realistically, passing the bill is a
long shot for a gridlocked Congress. Republicans in control of the House long
supported FHFA Acting Director DeMarco and his resistance to principal
reduction. Peters and Campbell introduced a bill reforming Fannie
and Freddie entirely last year, but the bill
has not been taken up. We’ll take a wait and see position and update you as
soon as we learn more.
To get a better idea of when your West
Sacramento home will be worth what you owe, log in to www.shortsaleandloanmod.info
for a free estimate or call me today for a free no obligation consultation and
for the latest West Sacramento short sale information. Call me
today and sleep better tonight; you’ll be glad you did
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