How To Avoid Foreclosure And The Wall Street Bailout

Posted by Alfred Sant

October 7, 2008

by Alfred Sant

Last Friday the House approved the Seven Hundred billion Dollar Bailout that was rejected earlier in the week. The question now is: how will the Wall Street Bailout impact homeowners who are in the risk of foreclosure?

Homeowners in foreclosure will get help in the form of the Government buying out bad mortgages loans from the banks and lenders, and then work with the homeowners directly or through Fannie Maid and Freddie Mac.

Here is where the problem comes; there is a new Bill that US Congress passed In July, it is called the New Housing Rescue Law, and was supposed to come into effect in October 2nd, which was signed before this financial crisis came to light.

It is not clear if the Government will work with homeowners through the housing bill that was signed back in July in which each loan will have to be underwritten by an FHA lender on a case-by-case basis. That means the banks would verify income statements, bank accounts, job histories and credit scores. It is going to be as if you are applying for a new loan.

You will have to meet all credit criteria to qualify, according to the original bill. For the Lenders is a voluntary program, so if the original lender agrees to the write-down, a new FHA Approved lender purchases the old loan and takes over the reworked mortgage Loan, and again it all will depend how this financial situation develop. There is a predetermined up-front cost for borrowers facing foreclosures to bear. Loan origination cost and fees will vary by lender, but these can be paid by the borrower over the life of the loan in the form of a slightly higher interest rate.

The refinanced loans do come with many strings, so the homeowners must understand what they are getting into. For one thing, borrowers are responsible for paying a lifetime insurance premium to the FHA, which will be 1.5% of the principal annually. For example, if your home is value at $250,000, you will promise to pay to the FHA an annual fee of $3,750.00. That is on top of whatever you are already paying for Home Insurance Home taxes, which is abusive, I think.

Homeowners also agree to share any profits from future home-price appreciation with the FHA. To do that, you, as a borrower will pay a 3% exit fee of the mortgage principal to the FHA when you resell or refinance anytime in the future. This means, if you later sell your home for 275,000, you will have to pay to the FHA a total of $8,250.00, just for the exit fee. But it gets worst.

I as a homeowner will have to agree to pay the FHA a hundred percent of any profits I realize from higher home prices if I sell or refinance within a year. If I sell my house anytime in the future, not matter how many years from now; I will have to pay to the FHA a minimum of fifty percent of my profit.

With the financial crisis that we are facing right now, is up in the air how, if ever, this new help release program will be implemented as it was written, but the fact is that no matter what is going to happen, the fact is that you need to fight foreclosure and hold on to your home now more than ever, because that is the only way that you may take advantage of any help program that may be available in the future. To learn more make sure you visit my Website.

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