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There is finally some light at the end of the tunnel for home owners facing foreclosure, are upside down in their mortgages or have a mortgage rate that is about to go adjustable. The Senate on Saturday passed a housing bill that will offer up to $300 billion in loans for troubled homeowners. That’s million with a ‘B’.

What does this mean for you? I have read the bill and pulled out the finer points for those of you who do not wish to read through 700 pages of political mumbo jumbo.

The bill requires your lender to write down your mortgage and refinance to 90% of your homes current value. If you owe $500,000 on your mortgage and your home is now worth $350,000 the lender will write a new loan for $315,000 at the current FHA 30 year fixed mortgage rate. Keep in mind the lender must agree to do this; which to me means the lender will look at the cost of foreclosing on your property and the cost to refinance at the 90% and see which option is cheaper and less of a headache for them.

Here are some basic qualifications:

• The property must be owner-occupied and must have been purchased between January 2005 and June 2007
• You must be spending at least 31% of your gross income on your mortgage payment.
• You must prove you will not be able to continue making your current payment and that you can afford to make the new payment.

What is my cost?

Your old lender must agree to “eat” any fees or penalties on the loan including pre-payment penalty. They must also accept the proceeds of the new loan on a paid-in-full basis. They must also agree to pay the FHA an upfront premium equal to 3% of the new mortgage principal.

You will be responsible for paying an insurance premium to the FHA guaranteeing the loan which is equal to 1.5% of the loan amount annually broken up over 12 months. You must also agree to share in any profits from future home-price appreciation to the FHA. You will need to pay a 3% exit-fee of the mortgage principal to the FHA if you sell or refinance.

Plus, you must agree to pay the FHA 100% of any profits if you sell or refinance within the first year after your loan modification. After the first year you will share 90% of the profits with the FHA. The percentage will continue to drop 10% per year after that until the 5th year where it will be a 50% split where it will remain.

These are the basics and President Bush is expected to sign the bill any day which will take effect October 1, 2008. Keep in mind, it may take several months of trial and error for the process to become streamlined. I have compiled a list of clients over the last several months who have contacted me for refinances. Unfortunately, they were upside down in their mortgages and I was unable to help them. Beginning in September I will be calling these clients and refinancing their properties under this new bill. If you would like to be added to this list please click here : http://www.garnesmortgage.com/fha_bill.html

I am based out of Las Vegas, Nevada but am licensed to do loans in 16 other states including:

Alaska, Arizona, California, Florida, Iowa, Indiana, Maryland, Massachusetts, Michigan, Nebraksa,   New Mexico, New York, Oregon, Texas, Utah & Washington

Tags: FHA //