President Bush has announced several steps his administration and other members of the federal government plan to take to aid homeowners in danger of entering foreclosure – particularly those borrowers who hold adjustable-rate mortgages and will be unable to meet payments after the interest-rate reset.
According to a White House press release, members of the HOPE NOW alliance, which includes counselors, mortgage market participants and mortgage servicers, have agreed on a set of new industry-wide standards to provide relief to these borrowers in one of three ways: refinancing an existing loan into a new private mortgage, moving the borrower into an FHASecure loan, or freezing the current interest rate for five years.
A statement from the National Association of Home Builders, which supports the plan, adds that Bush's strategies to stave off foreclosures, which emerged from discussions with various groups including lenders, builders, investors, consumer activists, housing economists and regulators, is aimed at borrowers with loans that were originated between Jan. 1, 2005, and July 31, 2007, with rates that are scheduled to reset between Jan. 1, 2008, and July 31, 2010.
The Bush administration has also proposed allowing cities and states to issue tax-exempt mortgage bonds to refinance existing loans, and the president formally urged Congress to approve this temporary measure quickly.
In addition, the Federal Housing Administration (FHA) plans to begin charging mortgage insurance premiums based on the individual risk of each loan, using traditional underwriting standards. The president's office says that risk-based pricing will expand access and enable FHA to help even more low- and moderate-income families who could not otherwise qualify for prime-rate financing.