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Expectations lowered for new mortgage aid program

December 29th, 2008 9:43 AM by Lehel Szucs

Expectations lowered for new mortgage aid program

Associated Press
3:18 PM PST, November 3, 2008

WASHINGTON -- The government expects only 20,000 troubled borrowers will apply to refinance into more affordable home loans by next fall under a new mortgage aid program passed by lawmakers over the summer.

The $300 billion "'Hope for Homeowners" program was launched Oct. 1. Designed by lawmakers eager to respond to the mortgage crisis, the Congressional Budget Office had projected it would let 400,000 troubled homeowners swap risky loans for conventional 30-year fixed rate loans with lower rates.

"It just reinforces that none of the federal efforts to date seem to be getting the job done," said mortgage industry consultant Howard Glaser, a former housing official in the Clinton administration. "There's just no question that when a new president and Congress come back to town, they're going to take much more aggressive intervention."

To participate, homeowners can try to persuade their existing lender to join the program, but the decision is ultimately up to the lender. The banking industry appears likely to favor options that don't require an immediate reduction in principal, such as deferring payments, allowing partial payments and lowering the interest rate.

"We've said from the start that it would be a tool that would be used after other loss mitigation programs and opportunities would be exhausted," said John Courson, chief operating officer of the Mortgage Bankers Association.

Hope For Homeowners is limited to borrowers who are spending more than 31% of their income on mortgage payments. Loans made after Jan. 1 of this year are excluded.
Posted in:General
Posted by Lehel Szucs on December 29th, 2008 9:43 AM

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