House Financial Services Committee Chairman Barney Frank, D-Mass., has announced new legislation aimed at stemming the rise in mortgage foreclosures. The bill would let the Federal Housing Administration ensure and guarantee FHA refinanced mortgages that have been written down by lenders.
The bill that Mr. Frank is planning to introduce would permit the FHA to provide up to $300 billion in new guarantees to help borrowers into fha refinaning programs. The idea behind the bill is to make FHA refinancing possible for people who currently owe more than their home is worth.
In exchange for the acceptance of a substantial write-down of principal, the existing lender would receive a short payment from the proceeds of a new FHA loan if the restructured loan would result in terms that the borrower can be expected to pay.
The lender would have a cash payment and no further credit exposure to the borrower.
“This could potentially refinance between one and two million loans and help these families stay in their homes, protect neighborhoods and help stabilize the housing market,” according to a press release issued by the Financial Services Committee.
More from Reuters here.
If this goes through, many, many, many more people will be able to benefit with an FHA refinancing option.
