Will the New Housing Rescue Program Help Many Distressed Homeowners?

by Donald Hanz on Foreclosure Crisis

When the controversial housing bill became a law last Wednesday, millions of troubled homeowners breathed a sigh of relief. After all, the new housing legislation contains provisions that are supposedly designed to assist homeowners by allowing them to shift to government-backed mortgages.

But many experts are worried that the new housing law will not be able to help a significant number of troubled borrowers. Aside from the relatively limited budget, homeowners will have to meet certain requirements before enjoying the benefits of the mortgage-relief program.

For starters, the original mortgage holder will have the decision to allow the borrower to apply for the said program. They have to give their approval because they will eventually be suffering some losses and they have to check if that loss will be less than what they will lose if they proceed with the foreclosure.

The mortgage-relief program included in the new legislation is targeting about 400,000 struggling homeowners. Unfortunately, there are approximately 2.8 million households, which are likely to be foreclosed by the end of the year, not counting the millions of homes that entered some stage of foreclosure in the last two years.

The criteria that the homeowners must meet to become eligible for the program include the following:

  • You must be a first-time homebuyer.
  • The mortgage loan was taken out before January 1, 2008.
  • If you are spending 31 percent or more of your monthly income on mortgage payments.

As mentioned earlier, the bank will also have to agree. In most cases, they will need to determine if they can still work out some kind of deal with the borrower in order to allow them to continue making payments. If an agreement is reached, most banks will presumably prefer this rather than approve the request of the borrower to be allowed to enroll in the housing program.