New Bill for Mortgage help again!
Backed by the Fed and banking industry, the House of Representatives have again passed a Mortgage Bill on the 8th May, 2008. The Bill is likely to help homeowners who’re unable to cope up with mortgage payments and at the same time it will enable lenders/banks recover their investments by passing on failing loans to the federal government.
What’s the purpose of the Bill?
The purpose of the bill is to reduce the number of foreclosures and help banks/lenders avoid losses on their sub-prime loans thereby stabilizing the housing market. However, the President has announced that if such a Bill is passed by the Senate members, then he would veto it.
What is it all about?
The Bill has been passed such that it would make banks and mortgage lenders accept a reduction in the principal amount of troubled loans. And in return, the federal government will provide a guaranty on the refinanced loans which borrowers take out in order to avoid foreclosure. The aim is to help people who’re upside down on their mortgages - a situation where they owe a lot more than what’s their home is valued in the current market.
Besides, the Bill has a provision which is expected to prevent any lawsuit on mortgage servicers.
It’s true that the New Mortgage Bill will help borrowers to some extent. But what about borrowers who are already under foreclosure? Moreover, as per the figures provided by the CBO (Congressional Budget Office), around 500,000 homeowners are expected to get mortgage help whereas there are around 1.5 Million already in foreclosure and another 2.8 Million are likely to follow.
Last but not the least, the Bill does not stop banks from carrying out new foreclosures or imposing other restrictions on borrowers. So, I think it’s just another effort towards creating hope amongst borrowers in distress. And, since not many are expected to get help, several borrowers are likely to end up in despair.
Technorati Tags: new mortgage bill, mortgage help, avoid subprime loss