Mortgage Agencies Butt Heads Over Plan To Help Underwater Homeowners

Mortgage Agencies Butt Heads Over Plan To Help Underwater Homeowners

A proposal to have Fannie Mae and Freddie Mac reduce mortgage balances of underwater homeowners is again in the news.

Government agencies are butting heads over the idea, according to an article in The Washington Post today. The Federal Housing Administration or FHA, which has FHA Short to help underwater borrowers, wants Fannie and Freddie to offer a similar program to help underwater homeowners.

But Fannie's and Freddie's regulator, the Federal Housing Finance Agency is against the idea. The Wall Street Journal, first reporting the story yesterday, also mentioned that Fannie and Freddie are resisting pressure from the Obama Administration to join FHA Short and cut mortgage balances.

Not surprisingly, Fannie, Freddie and their regulator are worried about losing money, in addition to being skeptical about the program's effectiveness.

Its effectiveness should be a concern. Since September, FHA Short has helped all of three homeowners. Lack of lender participation, which is voluntary as well as the program's strict requirements are cited as obstacles.

Lenders offer other options to help homeowners avoid foreclosure, and Fannie and Freddie can still offer low current mortgage rates to underwater homeowners through the Home Affordable Refinance Program.

Underwater homeowners have first mortgage balances that are larger than their home's current market balance. Reducing their mortgage balances is supposed to be a good way to help them keep their homes and continue making mortgage payments.

Almost a quarter of homeowners with mortgages are supposedly underwater. But how many homeowners realize they are underwater? Many are not knowledgeable about the latest home values trends. Many may think their home is better than it actually is and may believe the home renovations they've done add more value than they really do.

They may be deluding themselves. But they'll keep paying their mortgage regardless of being underwater.

In October we reported in a blog that a study by the Federal Reserve Bank of San Francisco concluded that underwater homeowners will not walk away from their mortgages in large numbers. Instead most will keep paying their mortgage, betting that home value increases will eventually put them in positive territory.

Senate Republicans may oppose the idea and either block it or restrict it so much it becomes useless.

At a confirmation hearing for the new FHFA chief Richard Shelby, the top Republican on the Senate banking committee, expressed reservations, if not opposition. "While underwater homeowners could benefit from principal write-downs," he said, "financing the write-downs through additional losses imposed on taxpayers amounts to redistribution from taxpayers in general to certain classes of homeowners."

POST COMMENT

Need extra income-Part time jobs from home Acrylic window applications for your home or office New York Homes For Sale In A Down Industry New York Homes For Sale At Uncomplicated Inexpensive Rates How to Remove Stains on Floor Carpets Carpet Cleaning Today Your Intro To Flat Irons Hiring A Good Plumber In Atlanta Importance of Home Light Fixtures Bathroom Light Fixtures- Beauty in a Bathroom Buying a home in Tampa? The Real Estate Market in Tampa Home Staging And How It Can Help Sell Your Home