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Will new laws rescue homeowners?

Both the House and Senate have been working separately on legislation aimed at rescuing struggling homeowners during the recent foreclosure crisis. The thrust of both plans is to expand government mortgage insurance. When facing a foreclosure, a borrower could refinance into a government-guaranteed 30-year fixed rate mortgage under specific conditions that include the home being the owner's primary residence and the holder of the existing mortgage accepting 85% of the home's present appraisal value as payment in full.

The difference between the two plans arises with regard to funding. Under the House plan, $1.7 billion from the federal budget would be required to set up the program that would be administered by the Federal Housing Administration. It is estimated that more than 500,000 mortgages would be refinanced over the next 5 years at a total expense of $2.7 billion to taxpayers. This type of taxpayer funding has been highly criticized by a vast number of Republicans, including the President, who feel the funds will serve as a bailout, as much of the money finds its way into the hands of real estate speculators and irresponsible lenders. If such a plan did make it out of the House the President has vowed to veto it.

On the other hand, the Senate has negotiated a more bipartisan plan. The money to start up the program is pulled from an "affordable housing fund", capitalized by Fannie Mae and Freddie Mac by collecting less than half a cent on every dollar of mortgages purchased by those companies. It is estimated that $500 million would be pulled from the "affordable housing fund" to set up the program. It would run for only 3 years, yet still refinance about the same number of mortgages as the House plan. After the expiration of the foreclosure aid period, the "affordable housing fund" would continue to exist and be funded in the same manner in order to construct affordable housing, such as low income rental housing.

The Senate plan has not been met with as much scrutiny because it is not dependant on a direct taxpayer cost; even the President has said he is willing to take a look at the plan if and when it makes it out of Committee. So as foreclosure and unemployment rates continue to rise, as more people feel the pinch created by sky-rocketing gas prices, expect something to come out of Washington to ease some homeowner's struggles. After all, there is a federal election looming. [THE FOREGOING IS A GENERAL DISCUSSION OF THE LAW AND SHOULD NOT BE CONSIDERED AS LEGAL ADVICE. SHOULD YOU HAVE A SPECIFIC QUESTION, PLEASE CONTACT OUR OFFICE OR MAKE AN APPOINTMENT].

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