Did anybody have any experience or was asked about the 2008 Housing recovery bill? Please do share.

Asked by R C, San Marcos, CA Tue Sep 9, 2008

I encountered a borrower who have 75% of his income going to mortgage. He is having a hard time keeping up the payments and asked me about this bill that he heard about. Surely, he qualify because more than 31% of his income is going to mortgage and he refinaced his house late 2005. That was the easy part qualifying.

Challenging part, his lender refused to negotiate unless he goes into short sale. I was just wondering if the bill is too young that lenders have no set guidelines on their part to do it or it is just that they think it is not worth their losses because the bill specified that it is VOLUNTARY for the lenders to do it so they can say NO if they want to.

Are they waiting until October 01 to participate because that is when the law is official?

Just wondering if anybody had a more positive experience with this bill? Other loan officers I know are frustrated too because they encountered the same road block. Please do share your insight positive or negative.

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R C, , San Marcos, CA
Tue Sep 9, 2008
Thanks Deep River, as of now all we can do is read and research. Maybe the write off incentive for the lenders are not as attractive enough compared to short sale and foreclosure because based on what we see ROEs are turning into a bidding war for buyers.

Speculate we must let us see who is the first to dip their toes in the water come October 1.
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Other/Just L…, , Fleming Fitch Grant, Holly Hill, FL
Tue Sep 9, 2008

I have had several clients ask about the Hope for Homeowners title in the American Housing Rescue and Foreclosure Prevention Act of 2008, but I have yet to see a Mortgagee Letter from HUD detailing the program. So far just two MLs have been issued from the legislation - one making the moratorium on risk based FHA premiums effective Oct 1, 2008, and the other relating to loss mitigation and partial FHA insurance claims.

My reading of the Act tells me Hope for Homeowners is geared towards loan work-outs. A lender may voluntarily write down the balance to 90% of appraised value to receive FHA insurance on a non-FHA insured loan. You are correct that the rule calls for a minimum housing ratio of 31% to qualify... but all other FHA guidelines apply. That tells me that the total debt ratio can't exceed 43%. Absent a ML, however, all we can do is speculate.

I suspect that your client's lender doubts your client can qualify for FHA insurance which may be why the lender requires a short sale.
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