Foreclosure Prevention: New law will help!

It looks like Bush will cave in and sign the compromise foreclosure prevention bill passed by the House and sent to the Senate. For those who are in foreclosure — or who may be — the main advantage of the bill is that it gives a big incentive to lenders to do a “cram down”– reduce the principle of the loan.

If a lender agrees to write off that portion of a debt which is above the current value of the house, and fix variable interest rates, bringing the cost of the debt down to something the homeowner can afford, the FHA will agree to insure the loan so that if the homeowner falls into default again, the FHA will pay off the debt after foreclosure. Sponsors of the bill say it will help nearly 500,000 homeowners avoid foreclosure.

There is much more to the bill, including a rescue of Fannie Mae and Freddie Mac, more money for counseling, grants to allow city governments to buy and rehab foreclosed homes, and money for low income housing and tax credits for first time home buyers.

Even if you are not in foreclosure or heading at it, if your house is “under water” (mortgage balance exceeds current market value); and you are having trouble making mortgage payments (even though you have managed to keep up) watch this space and when the bill is signed, you should get to work. We’ll tell you where to go for foreclosure prevention!

Read more about how to Avoid Foreclosure and Help with Mortgage Modifications at AskJackAboutDebt.

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