President Barack Obama announced two measures Tuesday to expand housing relief to military members and borrowers with loans backed by the Federal Housing Administration (FHA).
The two efforts offer a mix of private sector payments and federal intervention. Obama said in a speech Tuesday that he was unwilling to "sit by and wait for the housing market to hit bottom," likely a reference to past remarks from Republican rival Mitt Romney, who is battling Rick Santorum in Super Tuesday primary elections.
Major lenders including Bank of America, JPMorgan Chase, Ally Financial, Citigroup and Wells Fargo will review foreclosures involving military service members and veterans since 2006 and provide compensation equal to the lost value of their homes, plus interest and an additional $116,785, if the foreclosures are found to be improper.
The banks will also refund money lost from interest rate payments in excess of 6 percent after reviewing files dating back to 2008. They will also compensate service members who were forced to sell their homes at a loss due to the military moving them.
The five lenders are also involved in a massive $26 billion settlement with 49 statesover foreclosure violations,announced last month. They will also pay $10 million to the Veterans Housing Benefit Program Fund, in addition to a previous settlement.
In a separate action, homeowners with mortgages backed by the FHA will be able to refinance their mortgages with a smaller upfront fee of .01 percent of the loan's balance, down from 1 percent. However, only loans originated prior to June 1, 2009, are eligible for the program. The White House estimates that 2 million to 3 million FHA borrowers will be eligible for the program.
The relief is unlikely to improve the current housing market, experts have said, but will aid homeowners who have struggled with declining home values and high mortgage payments.
However, lowering the FHA's fees may hurt the agency's already dire financial situation. Congress warned that the FHA could require a bailout if home values continue to slide.
RESOURCE IBTimes
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