FHA agreed to provide mortgage insurance to buyers financing homes that were recently foreclosed on. Bloomberg believse this to be a sign the president may be ready to assist as the home sales continues to decline.
HUD agreed to insure home mortgages for low and moderate income borrowers, bad credit applicants and first-time buyers. The first step was FHA waiving a 90-day waiting period for insurance on foreclosed property. “A glut of foreclosed and abandoned homes harms neighborhoods, frustrates homebuyers and delays a community’s recovery,” Federal Housing Commissioner Brian Montgomery said in the release.
The temporary one-year policy for foreclosure insurance indicated the US government may be easing its opposition to using taxpayer money to rescue lenders and investors in favor of letting the mortgage industry modify home loans to stimulate a deflated real estate market. The Democratic-controlled Congress has proposed a measure that is similar to the FHA insurance program. House Financial Services Committee Chairman Barney Frankintroduced legislation that would create a $15 billion loan-and-grant program to help states buy and rehabilitate foreclosed homes. The U.S. House of Representatives approved the measure last month.
According to Realty Trac, banks repossessed twice as many homes in May and foreclosure filings rose 48% from athe previous year. Declining property values have backed borrowers in to a corner with home loans that they didn’t have the ability to repay when the rates adjusted.
