House Approves Aid for Homeowners

[Oct 26, 2007.]

 

The U.S. House last week approved a program designed to help homeowners to avoid losing their homes as a result of delinquencies on their loan payments.

The House approved the legislation by an overwhelming margin - 348-72. Under the plan, the Federal Housing Administration will back refinanced loans for homeowners who have fallen behind on their payments because of higher interest rates. According to an official with Housing and Urban Development, the legislation could impact more than 200,000 homeowners.

"This is a historic day for FHA," said Brian Montgomery, an assistant secretary for Housing and Urban Development. Meanwhile, the U.S. Senate has O.K.'d $200 million to groups which help homeowners avert foreclosure.

The aid packages may come just in time. RealtyTrac reports that the number of foreclosure filings in August were more than twice as high as the rate in August of 2006. More than 2 million adjustable-rate mortgages are expected to reset to higher interest rates over the coming year, increasing the risk of additional foreclosures. As a result, the housing crisis could emerge as a key issue in next year's Presidential contests.

The housing crunch, coupled with troubles in the financial markets, threatens to propel the economy into recession. The Federal Reserve tried, however, to reduce that risk by lowering a key interest rate by a half percent recently.

The real estate crisis is now apparently affecting every region of the country, although the problem may be most acute in the western part of the United States. Meanwhile, housing prices have also been plummeting, worsening the fortunes of home sellers.

Prospective home buyers are also struggling because of a tightening of the standards for home loans. Home shoppers with particularly shaky credit histories are being hardest hit due to the collapse of the subprime loan market. Subprime loans are those loans that are offered to home buyers with troubled credit histories.

Julie Ann Amos
October 26th 2007

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