Housing and Economic Recover of 2008

Here is a simple overview of the Housing and Economic Recovery Act of 2008, which is set to begin on October 1, 2008:

  1. Via the Federal Housing Administration (FHA) approximately 400,000 borrowers that are in danger of losing their homes will be able to refinance into a more affordable government-insured mortgage.  The program is offered by lenders who voluntarily reduce mortgages for at-risk homeowners to at least 90% of the property’s current value.
  2. The program is set to begin on October 1, 2008 and end on September 30, 2011.
  3. To be eligible a borrower must:  a) Have a loan on a owner-occupied principal residence.  Investors and speculators cannot participate in the program.  b) The monthly mortgage payment must be greater than at least 31 percent of the borrower’s total monthly income as of March 1, 2008.  c) Certify that the borrower has not intentionally defaulted on the existing mortgage.  d) The borrower has not been convicted of fraud.
  4. Homeowners or mortgage servicers of an existing eligible loan needs to contact an FHA approved lender.  The FHA approved lender will determine the size of the loan that the borrower can repay and which meets the requirements of the program.  If the lender agrees to write-down the amount of the existing mortgage and make the new loan affordable, the FHA lender will pay off the discounted existing mortgage.  The loans provided under this program must be 30 year fixed rate loans.
  5. Lenders are not required to participate.  The program is completely voluntary for lenders, loan services, investors and borrowers.
  6. This ACT does not bail out speculators, investors and investors.  Only primary residences are eligible.  Investors and lenders must take a big loss to participate.  The owner of the old mortgage can get a maximum of 90% of the current value of the home.  Lenders must also waive any penalties or fees and help pay for the origination and closing costs of the new loan.


Foreclosure