A new mortgage home loan bill that is meant to bring some homeowners mortgage loan relief has received congressional committee approval. In bold instances of standing your ground, the Democrats rebuffed innumerable Republican challenges to the bill. The bill gives the Federal Housing Administration the ability to guarantee up to $300 billion in new home loans provided by government-approved mortgage lenders.
The measure was approved by the House Financial Services Committee by a vote of 42 to 21. The full House will vote for the bill this week. The committee believes the measure may help 1.5 million homeowners who are unable to pay their mortgages.
House committee chairman Rep. Barney Frank, the main sponsor of the bill, wants millions of Americans to avoid foreclosures due to the expanding credit crunch. Even individuals who knowingly overextended themselves in the past by having expensive mortgages will be afforded help.
The Democratic members of the House Financial Services Committee have defeated several Republican amendments to the proposal, which would have disqualified individuals with challenging credit. President Bush strongly opposes the bill to help out millions of Americans who are facing difficulties maintaining a roof over their heads.
The current measure would guarantee home loan mortgages provided by government approved private mortgage lenders. The new mortgage loans could equal up to 90% of a home's current value. Homeowners with mortgage-debt-to-income ratios of 35% or higher and who received a home loan before January would be eligible for the program.
The home loan and housing market has been seeking to level off since 2006. Homebuilders and homeowners have been looking for aid from Congress in the current economic atmosphere. In order for a homeowner to get a fresh FHA-backed mortgage loan, the mortgage lender would have to take a loss and accept a payment totaling no more than 85% of the house's value.
The federal government receives a portion of the profits if the homeowner sells the home in the future and would have to pay the home loan lenders only if owners default on FHA guaranteed loans. The Financial committee approximates between 1 to 2% of the new mortgage loans would default, costing the exchequer $3 billion to $6 billion.
The Bush administration believes existing FHA programs are sufficient to meet the needs of homeowners who are facing challenging financial circumstances. President Bush sees the congressional bill as a sop to current homeowners. But Rep. Frank sees the bill as a much needed S.O.S. to homeowners whose needs cannot be met under existing FHA programs.
By: Gaurav Bhola, MSM, Managing Editor
