Disclaimer: I am not a lawyer. I am
only publishing my interpretation of my situation. You should seek your
own legal representation for your own particular
situation. Do not rely on my
opinions or statements for your own purposes as state
and local law varies as do individual circumstances.
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Washington is trying to pass legislation aimed at
bailing out the faltering Fannie Mae and Freddie Mac. Congress
will be offering the two mortgage companies up to $300 billion
in order to support loans. Yes, this is another bailout for Wall
Street as these are public corporations even though they were
first created by the government. President Bush has changed his
mind and has now agreed not to veto the legislation.
While this legislation is
mainly aimed at stabilizing the economy, there just may be a
piece that might help the average American - the one's facing
foreclosure. The bill has a section that allows the FHA to back
new 30-year fixed rate mortgages for owners facing foreclosure.
The catch is that the lender has to agree to write down the loan
balances to 90% of the current appraised value of the home, and
the home must be occupied by the owner.
In addition, the lender
must pay a fee upfront equal to 3% of the home's appraised
value; and borrowers must pay an annual premium to the FHA equal
to 1.5% of the new loan balance. Any profits realized from
selling or refinancing the home must be shared with the
government. The new plan is scheduled to start on the first of
October.
Assuming that I can last
until October, let's see if this would help me. Let's check out
the numbers:
| Purchase Price |
$880,000 |
| Current Appraisal |
$400,000 |
| 90% of Appraisal |
$360,000 |
| 3% Fee for Lender |
$10,800 |
| 1.5% Annual Fee for Borrower |
$5,400 |
| Lender's Write Off Amount |
$509,200 |
If this works out, I
could definitely keep my house and make the new payments. The
lender, however, would have to write off a tremendous amount of
money; and it is completely voluntary for the lender to write
off anything. I just do not see the lenders jumping at this
deal. I think Washington is trying, but they are still missing
the mark until they force the mortgage companies into action.
How does this legislation
sound to you? Good, bad, worthless?
Cast your vote or
post a
comment or email me (Noah@ShortOnChange.com).
Take the Survey: What do you think about the new bailout for Freddie and Fannie? Click here to vote.
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