Foreclosure Help: President Bush Comes to the Rescue of Distressed Homeowners

September 10th, 2007

Even the US President George W. Bush could not keep himself aloof from the increasing rates of foreclosure across the country. He announced a few measures aimed at relaxing the tension of the distressed homeowners. Throughout the state, the crisis of foreclosure is making huge waves due to a leap in default payments, with huge media coverage all over the country.

Turmoil in the housing sector in the US has its affect across the globe. This is a first-ever official response of the administration towards the disturbed US housing industry.

As per the Washington post, the measures announced by the President incorporated a plan that will help homeowners by allowing them to refinance with a government insurance policy if they are not in a position to re-pay adjustable-rate mortgages taken earlier. Adjustable-rate mortgages extend a low rate at the time of initiation, but tend to increase at a later stage of the loan phase. Whereas the “Federal Housing Administration”(FHA) mortgage insurance policy program extends insurance on the loans taken by homeowners thereby reducing the risk factor associated with it. This way it helps lenders. Further, the reduced cost helps the borrower a lot.

The advantage of this program is that it will allow 80,100 more people to avail of federally insured mortgages in the year of 2008. The program is by now ready for 161,000 homeowners, as quoted by a senior official of the administration.

The Post also added that, as decided by the administration, the FHA program is only for those who are having poor credit records. The insurance premium will be high so that the risk factor associated with it is covered.

Mr. Bush also wants to increase the bound of mortgage extended under FHA program from the current level of $362791 to $417100. Approximately two million US homeowners have taken loans under the adjustable rate mortgage scheme.

A second measure, as per the Los Angles Times, announced by the President, talks about the temporary suspension of a law under which homeowners are required to pay tax on the debt amount forgiven by the lender.

This measure will be helpful for those who are managing somehow to lessen their mortgage by re-paying the loan amount, in order to avoid losing their properties to foreclosure.

A breakdown of the sub-prime mortgage market with soaring foreclosure filings and decreasing sale value of houses have caused a shuddering affect on financial markets worldwide. This in turn has raised the concern among economists regarding the fate of US economic growth in the near future.