FHA Getting Into The Short Sale Biz?

Whilst consuming the day’s real estate news of interest, I ran across an interesting little news bite from Realtor.org I’d like to share with you, and hear your comments on if you’re so inclined.

So check this out…

Democrats Seek to Aid Home Owners

Democrats in both houses of Congress are working to bring legislation to a vote that would target home owners who are facing foreclosure because they can’t pay the escalating interest.

Under the program, environed by House Financial Services Committee Chairman Barney Frank (D-Mass.) and Senate Banking Committee Chairman Christopher J. Dodd (D-Conn.), a home owner could contact an approved Federal Housing Administration lender for assistance.

The new lender would determine how much the house is worth and how much the home owner could reasonably afford to pay. The existing mortgage holder would then be asked to accept the lower amount, which would be paid in cash by the new lender. The mortgage would in turn be insured by the FHA.

Existing mortgage holders would bear most of the costs. Frank’s proposal would limit their payoff to 85 percent of the home’s current appraised value. The banks also would be required to waive all fees and penalties.

Home owners would have to pay for the FHA mortgage insurance and would owe the FHA a 3 percent exit fee when they sell their homes or refinance the new mortgage. They also would owe the FHA a portion of the profit if they sold within five years.

While some of the new mortgages would undoubtedly default, Congressional aides said the program would cost taxpayers little to nothing.

Sen. Richard C. Shelby (Ala.), the senior Republican on the Banking Committee, has repeatedly stated his opposition to “any taxpayer bailout of lenders or borrowers.”

I added the bold on two lines above myself for emphasis.

My first two ”gut feelings” are…

1. Is it just me, or does it sound like the FHA is getting into the short sale / preforeclosure investing business?
2. Am I the only one who thinks the chances of this costing taxpayers “little to nothing” is only true in certain places ?

I’d truly welcome hearing your thoughts in the blog comments below… 

Technorati: mortgage crisis, FHA bailout, short sales, preforeclosure investing

Share This | Print This | Popularity: 24%

Tags: Commentary, mortgage crisis, preforeclosure investing, short sales

Trackback URL for this entry :
http://blog.flippinghomes.com/index.php/commentary/fha-short-sales/trackback/