Mortgage Relief Program

As Foreclosures Rise, The Federal Government Weighs Options

By Sharon Secor

Direct Lending Solutions Staff Writer

In September, RealtyTrac reported a one month increase in the rate of foreclosures that was higher than they’ve seen since they began keeping such records. From coast to coast, local headlines reflect growing concern over the rising numbers of homeowners losing their homes to foreclosure. According to a September 30, 2007, story in the Washington Post, written by Jim Rokakis, during the first six months of 2007, in Stockton, California, “Stockton, Calif., lenders filed for foreclosure on one in 27 households.” In Detroit, according to data cited by Rokakis, the number was one in 29, and in metro Bridgeport, Connecticut, one in 122, which was, for that area, “an increase of 552 percent from 2006.” In light of the dramatic numbers throughout the nation, the federal government is beginning to seriously weight options.

Mortgage Relief Options Under Consideration

President Bush announced proposals designed to offer some relief to those that are struggling with matters related to foreclosure in a speech given on August 31, 2007. The administration can do just so much, however. Legislative action requires the support of Congress.

What the administration can do now, according to Bush, is to “launch a new foreclosure avoidance initiative.” The president has made Housing and Urban Development Secretary Alphonso Jackson and Treasury Secretary Henry Paulson responsible for working with a broad range of organizations that provide foreclosure counseling and refinancing opportunities to help homeowners before the reach the brink of foreclosure. “Community organizations like NeighborWorks, mortgage lenders and loan servicers, FHA, and Government-Sponsored Enterprises like Fannie Mae and Freddie Mac” are among those that Jackson and Paulson will be working with in the effort to reach more homeowners sooner.

The president is also encouraging Congress to pass legislation that will serve to change the tax code so that if a portion of the mortgage is forgiven when a home is sold for less than the amount owed, that forgiven portion is not counted as income that can be taxed. Currently, the forgiven amount is considered income and taxed as such. With the recent drop in home value and the current foreclosure pressures, the number of people affected by this is increasing.

Another proposal that the president made is to modernize the loan policies of the Federal Housing Administration. This modernization would ideally include “lower down payment requirements, allow FHA to insure bigger loans, and give FHA more pricing flexibility.” This would help not only low and mid-income buyers, but also those seeking to refinance the homes that they already have.

Proposals Designed To Prevent Another Foreclosure Crisis

The president also expressed his support of a variety of proposals designed to prevent another serious crisis of this nature. These include increasing public awareness and education about lending and mortgage matters, in an effort to help homeowners avoid problems before they start. One aspect of that would be to make sure that consumers are informed about the advantages of comparative shopping when it comes to finding the right loan, which – when considered with the proposals to make the lending industry’s operations more transparent, making clear, concise information about terms and conditions mandatory – has the potential to significantly reduce the number of borrowers that get caught up in loans that they may end up struggling with.

Other proposals include further regulation of the lending industries, including mortgage brokers, becoming more aggressive on a federal level in purging fraud from the mortgage industry, and addressing lending standards, tightening them, but not so much that low- and mid-income buyers are shut out of the market.

If you find yourself struggling with your mortgage, take action right away to make use of the opportunities available to you to help resolve the matter before it gets out of control, placing you on the brink of losing your home. The new federal proposals have a lot to offer, but while the government is working on making those changes, there are still options right now that you can put to use. Act now, while you have a broader range of options to choose from, because the longer you wait, the fewer choices you’ll have. A pro-active stance can help to prevent you becoming a foreclosure statistic.

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