White House to announce housing aid: sources

The White House plans to announce on Friday that it will require lenders to lower the mortgage payments of some unemployed workers and encourage lenders to eliminate some principal debt of homeowners who owe more than their home is worth, sources familiar with the plan said on Thursday.

The plan comes as President Barack Obama is under increasing political pressure to change his strategy for helping struggling homeowners and stem the tide of rising foreclosures and is the second major housing initiative announced in as many months.

Delinquencies on U.S. mortgages rose to nearly 14 percent in late 2009, led by a sharp increase in seriously overdue home loans held by the most credit-worthy borrowers, U.S. banking regulators said earlier on Thursday.

Obama's $75 billion homeowner assistance program announced last year has been widely criticized as ineffective by both Democrats and Republicans on Capitol Hill.

Representative Jackie Speier, a California Democrat who backs Obama on most issues, told a top administration official responsible for housing policy on Thursday that White House efforts so far have "failed miserably."

The new efforts include at least three and at most six months of temporary assistance for jobless workers and incentives for mortgage servicers to write down part of the principal balance, sources said.

The plan also aims to increase the Federal Housing Administration efforts to keep people in their homes as the cause for delinquencies has shifted from sub-prime borrowers to the unemployed and "underwater" borrowers: people who owe more than their house is worth.

Recognizing the difficulties for so-called loan servicers to modify loans for unemployed workers, the administration's plan aims for lenders to cut payments on existing loans to 31 percent of a borrowers income.

Howard Glaser, a mortgage industry analyst in Washington called the decision to focus on jobless and underwater borrowers a significant and welcome shift in the administration's strategy to stabilize housing market.

"They have recognized that the complexion of the mortgage crisis has changed. This is no longer about risky subprime loans -- its about home value declines that have made default a rational economic choice for homeowners," Glaser said in a note to clients.

It would use up to $14 billion of what remains of the $700 billion bailout to let borrowers refinance up to 115 percent of the value of the homes they live in.

The FHA plan is aimed at getting servicers to write down some or all of the so-called piggyback loans that have been a major sticking point for modifications thus far.

John Courson, chief executive officer of the Mortgage Bankers Association, welcomed the administration's efforts to expand its homeowner assistance.

"As the causes of the ongoing foreclosure crisis have shifted, we need to keep looking for new ways to help delinquent and underwater borrowers," Courson said in a prepared statement.

The principal reduction plan would be administered under the existing Home Affordable Modification Plan and is modeled after a principal reduction plan announced this week by Bank of America.

Under pressure from Massachusetts Attorney General Martha Coakley, Bank of America Corp said on Wednesday it would offer what could be up to $3 billion in loan forgiveness to about 45,000 troubled homeowners.

Bank of America pledged to offer an "earned principal forgiveness" of up to 30 percent for homeowners nationwide who owe more than 120 percent of the value of their home.

Bryan Whalen, a managing director at money manager TCW, which manages more than $115 billion, including mortgage-backed securities, cautioned that this could be aimed more at public opinion than the mortgage market.

"If this program is anything like Bank of America's -- in terms of scale -- I expect the market to not react to it," Whalen said.

"The BofA program involves 45,000 loans -- it doesn't move the needle one bit. The market will take a 'show me' approach to the White House announcement," Whalen said.

The plan comes just a few days after Treasury Secretary Timothy Geithner launched what could be a years-long process of overhauling the government's role in helping Americans buy homes.

Geithner told lawmakers the government should continue to play some role in any new system of housing finance Congress develops, although he said mortgage finance giants Fannie Mae and Freddie Mac should not be nationalized.

"As long as the administration continues to sidestep the larger issues such as job creation and how they intend to deal with Fannie and Freddie, subsequent misadventures (by the government) into the mortgage market will continue to be an exercise in futility," said Representative Darrell Issa of California, one of the hardest hit states.

article source: .reuters

Citigroup CitiMortgage Homeowners Refinance Mortgage For A Lower Interest Rate

Citigroup CitiMortgage is one of the mortgage lenders offering low mortgage interest rates on home loans and refinancing. Homeowners that refinance with Citigroup, or other mortgage lenders offering low mortgage rates that the present time, are getting interest rates on their mortgage for around 5%. Some homeowners have even see rates as low at 4.75%.

Also, homeowners aren’t just refinancing to a lower interest rate. Many homeowners are refinancing to a 30-year fixed rate mortgage and getting a lower monthly mortgage payment as well. Citigroup homeowners concerned with their mortgage payment may want to look into refinancing for a 30-year fixed rate mortgage, if they can afford to do so and it’s in their best interest.

Refinancing can also bring in more money if a homeowner had equity built in their home. Many homeowners refinance to get money from their home and pay off debt or home repairs, but homeowners that refinance to a lower interest rate and get money back may fair better if they pay on their mortgage principal.

Again, Citigroup isn’t the only big lender offering low interest rates at the present time. Check with other lenders and be sure you are getting the best possible rate when refinancing your home loan and that you are in the financial position to afford to refinance before proceeding.

article source: rwbpress

Student loan reform will provide relief to college students

The health care reform passed in the House of Representatives last Sunday won't only provide health care for the citizens of the United States, but will also provide some help for college students.

The reform was piggybacked on the back of health care reform.

The new student loan reform is aiming to eliminate the private sector from the process and have all loans come straight from the government.

According to the Congressional Budget Office, this would create a $62 billion net savings through 2020.

The $62 billion that's being saved would go back into financial aid.

SRU increased tuition by 3.5 percent before this school year, but the raise was below the rate of inflation for four straight years.

State schools are struggling to keep up in the current economy.

Students also bear the brunt of the burden because they're forced to pay higher tuition rates whenever the economy goes south.

SRU is still one of the cheapest schools in the state.

But with a $9 million deficit, how long will it be able to keep tuition costs so low?

Democrats trimmed their original spending plan by dropping the amount from $87 billion to $61 billion.

They increased the maximum number of dollars that could be spent on a Pell Grant from $5,300 to $5,900.

Besides increasing Pell Grants, the bill provides $1.5 billion to help students repay their loans. And beginning in 2014, borrowers won't be allowed to devote more than 10 percent of their monthly income to repay student loans.

The idea of there being more money toward financial aid is exciting for many students, and a majority of our staff is in favor of the program.

Any additional financial aid that could be provided for students would be beneficial.

Can you imagine, if we have children one day, what the cost of colleges will be?

Increasing tuition every year is going to hurt every aspect of academia.

The first victim of these increases would be lower-income students.

It's hard enough for students to pay as it as, let alone without any help for financial aid. These kids are trying to better their lives and may need an extra push to get there.

Students will also enjoy this new system because they'll have to spend less time worrying about making money to go to school.

Working will still be important, but with extra grant money coming in, they could put more focus on education.

Some of our staff members do have problems with the nature of how the bill was passed.

This is a practice that's gone on in the United States forever, but it's a reprehensible way to push a bill through.

Healthcare was on the front page of most major newspapers, while student loan reform was on page seven.

Also, cutting out the private sector will eliminate nearly 32,000 jobs.

The banks in the private sector used to be responsible for processing the loans once they were approved.

That isn't helping an economy rife with unemployment.

Also, increasing the Pell Grant by $600 is kind of insignificant, considering tuition at the Rock went up by $181 last year.

So in five years, the $600 extra wouldn't matter in four years.

We're all in favor of more money and hope this new program will benefit students sooner rather than later.

article source: theonlinerocket

Obama readies steps to fight foreclosures, particularly for unemployed

The Obama administration plans to overhaul how it is tackling the foreclosure crisis, in part by requiring lenders to temporarily slash or eliminate monthly mortgage payments for many borrowers who are unemployed, senior officials said Thursday.

Banks and other lenders would have to reduce the payments to no more than 31 percent of a borrower's income, which would typically be the amount of unemployment insurance, for three to six months. In some cases, administration officials said, a lender could allow a borrower to skip payments altogether.

The new push, which the White House is scheduled to announce Friday, takes direct aim at the major cause of the current wave of foreclosures: the spike in unemployment. While the initial mortgage crisis that erupted three years ago resulted from millions of risky home loans that went bad, more-recent defaults reflect the country's economic downturn and the inability of jobless borrowers to keep paying.

The administration's new push also seeks to more aggressively help borrowers who owe more on their mortgages than their properties are worth, offering financial incentives for the first time to lenders to cut the loan balances of such distressed homeowners. Those who are still current on their mortgages could get the chance to refinance on better terms into loans backed by the Federal Housing Administration.

The problem of "underwater" borrowers has bedeviled earlier administration efforts to address the mortgage crisis as home prices plunged.

Officials said the new initiatives will take effect over the next six months and be funded out of $50 billion previously allocated for foreclosure relief in the emergency bailout program for the financial system. No new taxpayer funds will be needed, the officials said.

The measures have been in the works for weeks, but President Obama is finally to release the details days after his watershed victory on health-care legislation. Following that bruising battle on Capitol Hill, his administration is now welcoming a chance to change the subject and turn its attention to the economy and, in particular, the plight of the unemployed -- concerns that are paramount for many Americans.

The administration has been facing increasing pressure from lawmakers and housing advocates to overhaul its foreclosure prevention efforts. So far, fewer than 200,000 borrowers have received permanent loan modifications under its $75 billion marquee program, known as Making Home Affordable. In the meantime, there is a growing backlog of distressed borrowers awaiting help from their lenders, which threatens to undercut efforts to stabilize the housing market.

Challenges unmet

Assistant Treasury Secretary Herbert M. Allison Jr. told a House panel Thursday that "we did not fully envision the challenges that we would encounter" when the earlier program was launched.

The efforts have been hampered by the difficulty of helping unemployed homeowners, who struggled to qualify for the government's mortgage relief plan. In requiring temporary relief for jobless borrowers, known as forbearance, officials are hoping to give them time to find a new job. Some will still need more assistance after the six-month period while others will ultimately lose their homes, administration officials said.

"We certainly support a forbearance opportunity for unemployed borrowers," said John A. Courson, chief executive of the Mortgage Bankers Association. He said he had not seen full details of the program.

Four measures

In addition to mortgage relief for unemployed borrowers, the program features four other key elements, including several steps to address the growing population of borrowers who owe significantly more than their home is worth, according to officials who spoke on the condition of anonymity because the official announcement had not been made. Underwater borrowers now make up about a quarter of all homeowners, according to First American CoreLogic. Economists consider these homeowners at higher risk of default because they cannot sell or refinance their home when they run into financial troubles.

The first key element is that the government will provide financial incentives to lenders that cut the balance of a borrower's mortgage. Banks and other lenders will be asked to reduce the principal owed on a loan if the amount is 15 percent more than their home is worth. The reduced amount would be set aside and forgiven by the lender over three years, as long as the homeowner remained current on the loan.

Until recently, administration officials had been reluctant to encourage lenders to cut the principal balance, worrying that this would encourage borrowers to become delinquent. But as federal regulators have struggled to make an impact on the foreclosure crisis, those qualms have weakened.

"We would prefer to see a required principal forgiveness program. But this is helpful," said David Berenbaum, chief program officer for the National Community Reinvestment Coalition, a nonprofit housing group. "This is another tool that will help consumers weather the crisis."

Second, the government will double the amount it pays to lenders that help modify second mortgages, such as piggyback loans, which enabled home buyers to put little or no money down, and home equity lines of credit.

These second mortgages are an added burden on struggling homeowners, especially when their total debt, as a result, is greater than their home value.

Federal officials have estimated that about half of all troubled homeowners have a second mortgage and last year launched a program to encourage lenders to restructure them. That effort has struggled to get off the ground.

Third, the new effort also increases the incentives paid to those lenders that find a way to avoid foreclosing on delinquent borrowers even if they can't qualify for mortgage relief. For example, the administration is scheduled to launch a program next month encouraging lenders to have borrowers sell their homes for less than the mortgage balance in what is known as a short sale.

Fourth, the administration is increasingly turning to the Federal Housing Administration to help underwater borrowers who are still keeping up their payments. The aim is to help these borrowers refinance into a more affordable loan. The FHA will offer incentives to lenders that reduce the amount borrowers owe on their primary mortgages by at least 10 percent.

For those borrowers who have more than one mortgage on their house, the FHA will allow refinancing of the first loan only. The new loan and any second mortgage could not exceed 15 percent of the home's value. This approach is meant to benefit not only borrowers but also lenders by allowing them to offload mortgages that might otherwise fail.

Only homeowners who are refinancing their main residence, have a credit score above 500 and can document their income are eligible.

Administration official say this refinancing program should not strain the FHA's already weakened finances because the effort will be financed with up to $14 billion out of the federal bailout program.

article source: washingtonpost

Gov’t to unveil plan to shrink some home loans

The Obama administration will announce Friday a plan to reduce the amount some troubled borrowers owe on their home loans, three people briefed on the matter said.

The people declined to be identified because the program had not yet been announced. Earlier in the day, Herbert Allison, an assistant Treasury secretary, told reporters officials are close to expanding the administration’s $75 billion foreclosure relief effort.

The plan to be unveiled Friday at the White House is expected to include at least three months of temporary assistance for borrowers who have lost their jobs. It also is expected to include an expanded effort to allow borrowers refinance into Federal Housing Administration loans.

The plan would expand the administration’s foreclosure-prevention program, which has been a disappointment to date. Critics have complained the program does little to encourage banks to cut borrowers’ principal balances on their primary loans. Nearly one in every three homeowners with a mortgage are “under water” — they owe more than their property is worth — according to Moody’s Economy.com.

Allison cautioned that any new plan is “not going to mean that all underwater mortgages are suddenly in the program.”

Obama administration officials have been studying such issues for months. An expansion of its foreclosure-prevention program has long been expected because only 170,000 homeowners have completed the process out of 1.1 million who began it over the past year.

And lawmakers have been frustrated by the lack of results.

“It has failed,” said Rep. Jackie Speier, D-Calif., at hearing of the House oversight committee on Thursday. “It has failed miserably and unfortunately we are incapable of saying: OK, this was an experiment, it didn’t work, let’s try something else.”

The program is designed to lower borrowers’ monthly payments by reducing mortgage rates to as low as 2 percent for five years and extending loan terms up to 40 years. To complete the program, homeowners need to go through a three month trial period and provide proof of their income, plus a letter documenting their financial hardship.

Though $75 billion in funding is available to the more than 100 lenders who have signed up, only a tiny fraction has been spent. Lenders had received $58 million in incentive payments as of last month, according to the Government Accountability Office.

AP Business Writer Daniel Wagner in Washington contributed to this report.

article source: taragana

Half of U.S. Home Loan Modifications Default Again

More than half of U.S. borrowers who received loan modifications on delinquent mortgages defaulted again after nine months, according to a federal report.

The re-default rate of loans modified in the first quarter of 2009 was 51.5 percent by the end of the year, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in a joint report today. The figure, which measures payments at least 30 days late, climbed to 57.9 percent for changes made in the prior 12 months.

U.S. homeowners are struggling to make payments as depressed housing prices leave them owing more than their properties are worth. About 24 percent of properties with a mortgage were underwater in the fourth quarter, First American CoreLogic said last month. The median price of a U.S. home was $165,100 in February, down 28 percent from its peak in July 2006, according to the National Association of Realtors.

Modifications are “clearly not working well and it’s not a surprise,” said Sam Khater, a senior economist at First American CoreLogic in Tysons Corner, Virginia. “It’s pointless to rewrite these loans because they’re underwater.”

The number of homes with mortgage payments at least 60 days late climbed 2.39 million in the fourth quarter, up 13.1 percent from the prior three months and 49.6 percent from the year earlier period, the quarterly Mortgage Metrics report said.

article source: democraticunderground

BofA Forgives Home-Loan Principals

According to the agreement with state attorneys general to help homeowners who got high-risk home loans from Countrywide Financial, Bank of America Corp. (BAC - Analyst Report) said on Wednesday that it would forgive about $3 billion in principal loan amount to about 45,000 troubled borrowers.

The borrowers had taken those loans before BofA acquired Countrywide Financial in mid-2008. However, following the acquisition, BofA has stopped such loans.

BofA will offer up to 30% of total loan balances for homeowners who owe more than 20% of the value of their home and missed at least two months of mortgage payments.

BofA is expected to start the process in May 2010. Following the execution, BofA will be the first U.S. mortgage lender to take such a systematic approach to reducing mortgage principal to help distressed borrowers by preventing foreclosures.

Wells Fargo & Co. (WFC - Analyst Report) said that it has modified more than 52,000 mortgage loans it absorbed when it acquired Wachovia Corp. In addition, Wells Fargo had reduced the principal on those loans by more than $2.6 billion.

BofA had already completed modifications for about 22,000 homeowners as of Feb 2010. This equals about 8% of its total list, compared to about 11% for JPMorgan Chase & Co. (JPM - Analyst Report).

Earlier this month, the Treasury received net proceeds of $1.5 billion from the sale of warrants entitling it to purchase BofA common stock.

The amount received from the auction of BofA warrants exceeds $1.1 billion raised from the sale of Goldman Sachs (GS - Analyst Report) warrants earlier.

The market turmoil was more harmful to BofA than its peers. However, the company has concluded acquisitions of Merrill Lynch and Countrywide Financial almost during the height of the financial crisis last year.

The CEO views these deals as beneficial for stakeholders of the company. Furthermore, this will allow the bank to focus on rebuilding customer relationships.

article source: zacks