According to a recent New York Times article, there are more than 3 million homeowners in peril, and financing analysts are forecasting over 2 million more will fall behind on their payments in the coming year as home prices fall further and the economy weakens.  Those stark numbers clearly demonstrate the challenges ahead for the lawmakers attempting to offer some relief to their voting base but also hint at what the next administration will be facing after the election. While the proposed FHA home loan program would help some homeowners, analysts say it would touch only a small percentage of those in trouble. 

According to Josh Emmons, a CFB Loan Services Manager, “this home financing bill would assist mortgage lenders and homeowners with refinance transactions for distressed home loans into a better and more affordable terms that would significantly decrease defaults, loan modifications and foreclosures.”  FHA provides a thirty year mortgage with a fixed interest rate that benefits the borrower and the government insurance protects the lenders. 

The Congressional Budget Office estimated these home loans would be used by about 400,000 homeowners and would not do much to improve the ailing housie market.“It’s not enough, even in the best of circumstances,” said Mark Zandi, chief economist of Moody’s Economy.com. The number of homeowners who will be assisted “is going to be overwhelmed by the 3 million that are headed toward default.”

Last week, the Senate voted overwhelmingly to advance the mortgage bill, and the House passed a version last month. The Senate, where the bill was delayed by a disagreement over other measures, is expected to come back after the July 4th recess and pass the mortgage aid bill.

Democratic leaders say Congress could send something to the president before lawmakers leave Washington in August.  The White House, which initially threatened to veto the measure, has indicated that it is open to supporting the bill if certain provisions are removed. “The Congress needs to come together and pass responsible housing legislation promoting foreclosure prevention that helps more Americans keep their homes,” President Bush said on Thursday.

Average rates on thirty year FHA mortgage loans in the United States increased one basis point to 6.5 percent on Friday, according to Bankrate’s daily mortgage rate report. The FHA home loans in this survey had an average less than 0.15 discount and points.  According to Lending expert, Bryan Dornan, “The FHA loan product has an opportunity to significantly help homeowners refinance their mortgage into an affordable payment while also avoiding foreclosure.”  

A thirty year FHA mortgage is insured by the Federal Housing Administration and has an interest rate that stays the same for the 30-year term. If a person financed a $250,000 home loan with a thirty year FHA mortgage at 6.625% would pay $1,600 a month for the life of the loan.