Foreclosure Measures Being Discussed by Congress and HUD Secretary

May 19th, 2009

Foreclosure measures were being discussed between Congress and Shaun Donovan against the background of all time low house sales and high number of foreclosures. Donovan said that HUD is ready to enforce the foreclosure prevention plans of Obama involving $75 billion from the coming week.

Donovan reiterated that according to the measures the borrowers burdened with hefty car loans, credit card dues and unmanageable mortgages would have their home loans refinanced. This would result in reduced monthly repayments even if the borrower has not started to default.

Donovan said, borrowers who owe the lenders up to 5% or perhaps more on the current value of the their residences will have the opportunity to refinance if the holders of the mortgage are Fannie Mae or Freddie Mac. Loan modifications will also be allowed for those borrowers who owe up to 50% or perhaps more on the current value of their houses.

Speaking before Senators Donovan opined, “we expect to see large numbers of modifications happen very quickly.” He is optimistic that this will result in the sharp fall of foreclosure rates as early as from April.

Soon after this, Fannie Mae announced that it required $15.2 billion as aid from the government. The amount is on the conservative side and is expected to increase. This was because in 2008 it lost about $59 billion with the mushrooming of the foreclosure tsunami. Fannie Mae has not asked for government funds till now. The Treasury announced that it plans to double the lifeline being thrown out to the jumbo mortgage duo, Fannie Mae and Freddie Mac, to the tune of $200 billion for each. Fannie Mae and Freddie Mac have been taken over by the government since last September when it went into the red. Together they own nearly half the mortgages of the nation.

The House also discussed the issue of foreclosures and is expected to vote on a housing relief plan. It was delayed because of an impasse over the problem of giving power to bankruptcy judges to alter terms of the loan. It would also reduce the principal and the interest rate for many borrowers.

The consumer advocates as well as the majority of the Democrats consider the measure to the key to solving the foreclosure crisis. It is thought that this is the only way borrowers would be able to stay in the houses that were their homes.