According to an article in the Star-Telegram , homeowners facing foreclosure who have loans backed by the Federal Housing Administration will be eligible for payment reductions similar to the Obama administration’s “Making Home Affordable” foreclosure prevention program.
The article said:
“Effective Aug. 15, financially troubled homeowners who have an FHA-insured loan can apply for a modification under a program parallel to “Making Home Affordable” to help lower their payments and avoid foreclosure.”
Currently the FHA backs about 5 million loans made to low-income borrowers and those with poor credit. Beginning in August, FHA homeowners facing foreclosure may be able to receive reduced mortgage payments in an effort to avoid foreclosure. But since the FHA has limits on how little interest lenders can charge, homeowners facing foreclosure will be enrolled in a different program that aims for the same result. Under the new foreclosure prevention program, FHA will allow lenders to set aside up to 30 percent of the total principal balance until the house is sold or the property is refinanced. No interest will be charged on that amount.
Many homeowners facing foreclosure have loans that are FHA insured; but that alone doesn’t protect them from foreclosure. Even the new foreclosure prevention program is a short-term solution that is simply delaying the problem. The bottom-line is that many homeowners facing foreclosure are living in homes with mortgages worth more than the value of the home. Being upside down will rear its ugly head once those homeowners attempt to refinance or sell their property.