Federal Aid to Distressed Homeowners Closer to Reality

helicopters land

Two key Senators on the Senate Banking Committee have reached an agreement to help distressed homeowners.

According to Bloomberg:

“The primary goal is to keep people in their homes, but also to help establish a floor and a bottom” to the housing slump, Dodd, a Connecticut Democrat, told reporters during the call.

The proposed legislation would a create a Federal Housing Administration program to insure up to $300 billion in refinanced mortgages for struggling borrowers after loan holders reduce principal. The Banking Committee is scheduled to debate and vote on the plan tomorrow.

According to CNN Money:

The deal was struck between the top Democrat and Republican on the Banking Committee: Chairman Christopher Dodd, D-Conn., and Ranking Member Richard Shelby, R-Ala.

“This legislation is good news for both the markets and homeowners,” Dodd said in a statement. “The bill addresses the root of our current economic problems – the foreclosure crisis – by creating a voluntary initiative at no estimated cost to taxpayers which will help Americans keep their homes.”

Dodd and Shelby had been in prolonged negotiations over the bill.

A key sticking point has been Shelby’s push to shield taxpayers if borrowers default on their payments after getting government-backed loans. He has said that he wants the FHA plan funded by redirecting money that Dodd’s original bill earmarked for a new affordable housing trust fund. The funds would be paid by Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500).

I’ve already expressed my thoughts on this bill in a prior post called “FHA: The Be All and End All of Loans“. I’m just glad that the tax payer is not on the hook for any of this – if you’re to believe Uncle Sam that is. ;-)

Image: Shared under creative commons license from submarginals’.

Funds Reallocated in Downpayment Assistance Program

The downpayment assistance program, which we participate in, the Home in Five Program (only for Maricopa county) had been running out of funds recently. Actually to be more precise funds for non targeted areas had been running out, there was always plenty of money for targeted and priority areas. Late last week the program announced that it would be reallocating funds to non-targeted areas. For those not familiar with the distinction, let me clarify the definitions:

Down Payment Assistance ProgramNon-targeted areas: All areas outside of the targeted and priority areas within Maricopa county. There are income limits determined by household size and loan size limits based on the property type. The main rule is that you need to be a first time home buyer in order to purchase a home in this area (using the funds from the Home in Five program).

Targeted Areas: This encompasses areas designated in Maricopa county by the program and is determined by census track numbers. The income limit and purchase size limit is higher than for non-targeted areas. Additionally purchasing in this area entitles you to a better interest rate. You do not need to be a first time home buyer to take advantage of the down payment assistance if you are purchasing in this area.

Priority Areas: These are areas within the targeted areas which are being given additional preference. Hence, the income and loan size limits are even higher and the interest rates are even better than for targeted areas.

The process of determining whether or not a property is in a targeted or priority area is in fact rather cumbersome. Contact me or Aimee with an address and we can look it up for you. Just a reminder, the funds are disbursed on a first come first serve basis and the program makes no guarantees on availability.

Further reading on the Home in Five Downpayment Assistance Program is available here.

This site is for informational purposes only. It is not sponsored or in any way affiliated with the government. If you are in need of a mortgage loan, consult with a licensed mortgage professional. All fair housing and equal housing opportunity laws apply when applying for a mortgage or buying a home. Copyright 2012.