Foreclosure Bill May Save The Dying But Not The Dead

August 13th, 2008 | Tags: Foreclosure

At last the much hyped foreclosure rescue bill has been given the green signal. It may save some of the dying but not the dead. It is a question of timing.

For many like 45-year-old Veronica Peterson the foreclosure rescue package has come too late. She is just waiting for the eviction orders that will push her out of her house worth $545,000 that she had purchased with a mortgage in Columbia about two years previously. A single mother of four children, Veronica could not manage the increased mortgage payments with her job as a day care worker. The interest rate jumped from 8-¼% to 11-¼%. The property has been foreclosed upon and now at any moment the eviction orders will come. Traumatized she does not know when and where she will go.

The federal foreclosure rescue bill is expected to help 400,000 foreclosed house owners across the country by modifying the old loans to new affordable ones that will be guaranteed by the government.

By the bill Fannie Mae and Freddie Mac will be able to increase its lending powers. It deals with about half the mortgages of the country.

Among other clauses are included tax breaks to the tune of $15 billion for first time buyers of houses. They will be able to avail of loans (maximum amount being $7,500) without paying interest. The money will come from a housing fund created for the purpose of making housing affordable to more people. This will be done by purchasing and renovating the foreclosed homes.

The states too will be empowered to sanction $181 million in extra mortgage revenue bonds for the purpose of refinancing and buying of houses. The developers engaged in building rental units will be able to benefit from tax credits from a fund of $1.1 million set aside for this.

The most important factor related to the refinancing programme is dependent on the voluntary wishes of the lenders. It is up to them to agree to do or not to do so. Thus one has to wait and watch the movements of the lenders commented Stuart Katzenberg of ACORN (Maryland branch). He said, “I’m holding my breath. I think some will.” When the housing market began to crumble everyone thought that the lenders would be proactive about refinancing because they did not want so many foreclosed houses on their shoulders. But in reality this was not so. They went ahead with foreclosures.