House Financial Services Committee Chairman Barney Frank, D-Mass., and Housing and Community Opportunity Subcommittee Chairwoman Maxine Waters, D-Calif., have called on the mortgage industry to delay or cancel foreclosures until a new law designed to refinance in-trouble borrowers goes into effect on October 1.
The new legislation will allow qualified applicants to refinance into FHA-insured mortgages and avoid foreclosures. Frank and Waters are urging the mortgage industry to work with borrowers who can take advantage of the new refinancing program, and Frank will hold a hearing in September to monitor the progress of loan modification by mortgage servicers.
‘I would hope that no one would be foreclosed upon between now and October 1 who would have qualified for this program had the effective date been immediate,’ Frank states.
‘And that is within your power to do. You can show some forbearance. October 1 is coming – begin the planning; begin the talking with people. But I think it would be a shame, an embarrassment to all of us if people were to lose their homes and the neighborhood deterioration were to be advanced – and the economy would suffer because to satisfy CBO and other rules, we delayed this a couple of months,’ he continues. ‘I earnestly hope that we can have that kind of cooperation.’
In order to qualify for Federal Housing (FHA) refinancing under the program, borrowers will need to have more than 31% of their monthly income dedicated toward their mortgage payment as of March 1, 2008, and live in their only home. Borrowers would have to meet the specific qualifications of the FHA program and agree to share future home appreciation with the government.
In addition, Frank called for restructuring the mortgage servicing industry if servicers fail to cooperate in aggressively forbearing and preventing foreclosures, or if there are institutional roadblocks that prevent mortgage workouts or other restructuring needed in order to help borrowers – and thereby help the housing market and the economy overall.
Source: House Financial Services Committee
