Another way to prevent foreclosure: More Banks offer to rewrite mortgages.

This is excerpted from an article written by the president of the Federal Reserve Bank of Boston, Erick Rosengren. One more attempt to help with the subprime mortgage crisis, at least until Congress decide what it wants to do. Note that it does not cover houses that are ‘under water” (mortgage amount exceeds current value of the house).

“…One refinance option is the Mortgage Relief Fund, Five large banks joined forces to set up this program, with the encouragement of the Federal Reserve Bank of Boston, to reach out to borrowers with high-rate loans. The banks can help borrowers explore refinancing into a more-affordable loan — maybe a Federal Housing Authority loan, a state-guaranteed loan or a conventional loan. We believe a number of community banks will join the effort in the coming months.

“To qualify, borrowers’ incomes must be verifiable and sufficient to support the payments. The borrower must have a history of generally making timely payments. The value of the home must support certain loan-to-value limits.

“For borrowers who qualify, the savings can be substantial — hundreds of dollars a month, and thousands of dollars a year. For example, if the interest rate on a new Federal Housing Authority mortgage is 6 percent and the initial rate on a subprime mortgage was 8 percent, the monthly payment on a $200,000 loan would be about $268 less, for a yearly savings of more than $3,200 (and more, had the original loan reset higher). One borrower already helped was at risk of losing her home. Her loan had adjusted from 7.4 percent to 8.9 percent, and was due to adjust again soon. Her new fixed-rate loan is saving her about $250 a month.

“For borrowers who do not have easy access to the Internet, the Mortgage Relief Fund banks can be contacted at the following numbers: Bank of America at 800-344-9403; Citizens Bank at 888-411-1145; Sovereign Bank at 800-288-6225; TD Banknorth at 800-281-0025, ext. 2315; and Webster Bank at 800-635-9191.
“Borrowers can also consult the Homeownership Preservation Foundation, which has established a national hot line, 888-995-HOPE. Calls are referred to counselors in the borrower’s area who can help borrowers decide if continued homeownership is feasible, and suggest strategies and resources.”

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