Effective Oct. 1, a housing bill was passed to help both troubled borrowers and lenders.
At-risk borrowers whose loans originated between January 2005 and June 2007 may be eligible to refinance their unaffordable mortgages into low-cost, fixed-rate loans insured by the Federal Housing Administration (FHA).
Whether current or in default, at least 31 percent of the borrower’s monthly income must be tied to paying the mortgage debt.
Other requirements come into play that have to do with the total debt owed and any secondary financing.
Borrowers may get information from their current lender or an FHA-approved lender, found on the Web site for the U.S. Department of Housing and Urban Development at www.hud.gov.
Each loan will be considered for underwriting after a new appraisal is performed and income and credit history is again documented and verified.
Be aware that there are many requirements for approval that, once secured, include many additional terms, such as insurance premiums and profit sharing on appreciation.
If you sell or refinance within a one-year period, you must pay the Federal Housing Administration 100 percent of your profits. That percentage drops 10 percent each additional year, down to 50 percent after five years.
Keep in mind, however, that savings can still be substantial on these lower interest, fixed-rate loans, which will never readjust like subprime mortgages can every six months.
Homeownership can again be the American Dream, not a nightmare.
The Placer County Association of Realtors is the professional trade association representing approximately 3,300 Realtors, affiliates and other related representatives in Placer County. Call them at (916) 624-8271 or visit their Web site at www.pcaor.com.