Bill to add new mortgage loan modification option
September 24, 2012 at 10:44 am in Accountability, GAN, Gary C. Peters, House, John B.T. Campbell III, Keith M. Ellison, News by Greyson Peltier 12 Comments
With home prices falling and mortgage borrowers defaulting, four lawmakers are calling for more options to help underwater homeowners.
Currently, the Principal Reduction Alternative and FHA Short Refinance offer principal reductions to homeowners that owe more than their home is worth, but are not available for Fannie Mae and Freddie Mac mortgages.
Sen Robert Menendez (D-NJ), Rep Gary Peters (D-MI), Rep. Keith Ellison (D-MI) and Rep John Campbell (R-CA) believe that the solution developed by one lender may be able to help underwater homeowners at risk of default. Their bill, the Preserving American Homeownership Act would make shared appreciation mortgage modifications available to borrowers with Fannie Mae, Freddie Mac, FHA and other government backed loans. The bill authorizes these modifications for homeowners over 60 days late on their loans for 2 years as a pilot program and offers a principal reduction in exchange for a portion of any home appreciation.
The amount of appreciation the lender is entitled to is dependent on how much the loan balance is reduced. The modifications would lower mortgages to 95 percent of the current appraised value of the home after 3 years of payments. Borrowers would only pay the bank’s share of the appreciation when they sell or refinance their home.
This solution has already been made available to borrowers with mortgages from Ocwen Financial Corporation. According to the sponsors it has been successful in helping homeowners keep their homes. “I’m a prime example of how shared appreciation mortgage modifications can really help homeowners,” said Juliana Collins who received this modification from her lender. “When my house depreciated $200,000 in less than 3 years, it was a nightmare that I was unable to refinance my way out of. This modification finally gave me the peace of mind, not only will my family and I get to stay in our home, but I won’t have to work multiple jobs and risk my health to be able to afford a mortgage that’s underwater.”
Rep. Campbell believes this bill is a necessary step to aid the recovery of the housing market. “Fewer distressed homeowners means improved consumer sentiment and a healthier housing market, both of which will positively contribute to long-term economic recovery,” said Campbell.
However, Tea Party member Patricia Linsky is concerned the proposal fixes a symptom while ignoring the cause. “Why is Campbell focusing on this before Congress reforms Fannie and Freddie… why are Fannie & Freddie still around? I certainly feel sorry for the borrowers, but Fannie & Freddie really stand to gain by this. This reminds me of Congress refusing to fix the border before they give amnesty; I’m seeing a pattern here.”
H.R. 5940 has been assigned to the House Committee on Financial Services and the Senate Banking, Housing and Urban Affairs Committee.
Contact Rep. Campbell at 202.225.5611, Sen. Menendez at 202.224.4744, Rep. Peters at 202.225.5802, or Rep. Ellison at 202-225-4755.
Greyson Peltier covers Representative Campbell for Government Accountability Network.
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Listen to Lindsey Williams and how the Federal Reserve corporation is now owner of your mortgage with paper money created out of thin air. You will lose your home if they succeed .Protect your home DO NOT trust the Fed !
Why can’t a bill be written and passed that if you are underwater on your mortgage and are current on your payments we will let you rewrite the mortgage for the amount you still owe but at the lower interest rate. So for instance our 1st and 2nd mortgage equals $395,000 house value is $295,000. We would like to refinance but cant due to the $100,000 difference that an appraisal would show. So why can’t we say we keep the amount without decreasing it and give us a new loan at 2.5 percent and we payoff what we owe. Everyone wins the bank really gets their money, we get a lower interest rate. We havent been able to do this because our mortgage isnt a Fannie or Freddie and I believe it is discrimination.
I think it already exists. Look up HARP 2.0.
All the modifications currently out there are for government backed loans. I checked with several companies including Quicken but there are no programs for “conventional” loans.
This is really about giving money to banks who have bad mortgages on their books.
Very simply, this is more Federal meddling in the home lending business which will ultimately cost the U.S. taxpayer. Freddie, Fannie and Ginnie buy these loans, bundle them, sell the bundled loans as securities to investors, and GUARANTEE the return on the securities. That guarantee is provided the full faith and credit of the American taxpayer. Rest assured, some of these loans will go bad particularly if we experience another recession.
The actual Kiwisaver First Home Loan plans might be selected from the supervisor. In case that you were not accepted on your selected plan, you will receive a written letter. It is possible to have different plans more appropriate to suit your needs. Unless you select your own plan together with your supervisor, you will end up with a default scheme from the Inland Revenue. You can, whenever you want, change plans but have to remain on only one. A number of plans are not allowed as well.
Rep. Keith Ellison, a known Muslim and Muslim sympathizer, is one of the sponsors of this bill. Only mortgage modification I could see him backing is a dangerous Sharia-compliant mortgage. Be very careful in considering this particular loan modification.
This seemingly destroys private ownership by giving the goverment a foothold. A lot of people were urged to buy more than they could afford in the first place and now they are suffering for it. When I bought I was urged to spend more than I thought I could afford, but I didin’t go there and through the years I weathered several layoffs quite nicely because I was prepared. Now I have no mortgage, which seems to have put me in a much better position.
My grandfather and father taught me about the great depression and hopefully people today will be teaching their children again about the evil of debt.
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Reducing the principal can certainly be one of the best ways to help homeowners stay in their homes. However, your income and credit rating will be evaluated to see if you qualify. If you can meet your monthly obligations but choose not to, you will not get the loan modification.