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It's dubbed the most significant housing bill in decades, and it's intended to help America's financially-troubled homeowners get back on their feet. But industry experts say those who really need a lifeline out of the Federal Housing Administration's (FHA)mortgage relief bill may not get it.
"I don't see any relief for the at-risk borrower right now," said Melissa Belcher, sales manager at Alabama Home Mortgage Lending, Inc. in Birmingham. "I get phone calls every day from borrowers who are in trouble and there's nowhere for them to turn."
The sweeping legislation, which President Bush (web|news|bio) signed early Wednesday morning, allows homeowners who are struggling to pay their mortgages to refinance them--essentially replace them with cheaper, federally-backed mortgages--instead of losing their homes to foreclosure.
By the end of 2009, it's estimated that 2.8 million people will be on the verge of losing their homes due to their inability to make their mortgage loan payments. However, the FHA legislation is only expected to help 15-percent of those homeowners, or roughly 400,000 people. To qualify for the assistance, a homeowner must be able to pay more than 31-percent of his or her income towards the mortgage.
"It actually says in the bill, 'qualified borrowers,' so you're not going to be 'qualified' if you're two to three months behind on your mortgage payment!" Belcher said.
Samford University business professor Larron Harper says the legislation is a good starting point, and necessary to help assuage fears about a real estate market collapse, but it is by no means a panacea.
"My biggest concern is, we did go through this 20 years ago (during the Savings and Loan crisis), and apparently, we didn't learn all the lessons we should have," Harper said. "There's no doubt we need the (legislation) to keep confidence in the banking system, but it appears we need some regulation of the banking system, and certainly of the mortgage brokers, because it appears there's some irresponsible lending that occurs."
In an effort to deter borrowers from signing on to risky deals, part of the new legislation calls for brokers to disclose how high a borrower's payments may rise.
Other highlights of the legislation include a temporary tax credit of up to $7,500 for low-income, first-time home buyers; funding for communities to repair foreclosed properties that have led to neighborhood blight; and a federally-funded financial buffer for home mortgage giants Fannie Mae and Freddie Mac to help restore confidence in the housing market.
My point is this: The $140k house we bought 9 years ago is absolutely within our means. As for the mortgage interest terms, I had the option to make a decision one way or the other. I knew the consequences of an adjusting ARM would be formidiable, and avoided it. I absolutely believe it was an excellent decision.
Now we have the government confiscating my hard earned money in the form of Taxes to bail out those that a) didn't read nor understand the terms and implications of their mortgage contract, or b) knew the terms and proceeded anyway to buy more home than they could afford.
Why should responsible people be penalized for the bad decisions of others? The market absolutely SHOULD be allowed to take care of this on it's own. As long as we have the government playing momma to the mortgage industry, they have no incentive to be nearly as responsible with the loans they make.
Show me where in the constitution this authority is granted. It's not there.
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