The President has now signed a bill designed to help homeowners struggling with mortgage debt that they cannot pay. Some people will benefit from the new legislation, which is set to take effect October 1, 2008. Others who are struggling with overwhelming debt and multiple mortgages may find no relief. To qualify for help under the new legislation you must meet the following requirements:
- You must live in the home;
- Your mortgage loan must have been issued between January 2005 and June 2007;
- Your mortgage payment must equal at least 31% of your gross monthly income;
- You must prove that you are unable to continue paying your monthly mortgage payment without your payments being reduced (you do not have to be current on your mortgage payment to qualify);
- You must pay off all other debt including home equity loans or lines of credit owed on your home before you can get a mortgage backed by FHA;
- You cannot get another home equity loan for 5 years unless the home equity loan is for upkeep on the house;
- Any new home equity loan must be approved by the FHA and cannot exceed 95% of the appraised value of the home;
- The value of your home, your income, job history, and credit scores will all be considered by your lender;
- You must pay the FHA, who is guaranteeing the loan, a yearly insurance premium equal to 1.5% of the principal;
- You must pay the FHA a fee of 3% of the mortgage principal when you sell or refinance your mortgage;
- If you sell your home within one year of taking out a program loan you will be required to pay the FHA 100% of any profits you realize from higher home values;
- After the first year, the percentage of profit you will have to pay to pay to the FHA drops by 10% per year until the 5th year; and
- The profit that must be paid to the FHA on resale never drops below 50%.
If a debtor’s main financial problem is increasing interest rates on an adjustable rate mortgage, the new legislation will provide relief in the form of lower, fixed interest rate mortgages. The requirement that any other debt owed on the house be paid before a debtor can qualify for a new loan will leave many people without the help they need. If you are struggling with debt, call our bankruptcy lawyers for a free consultation. We will discuss with you all of your options including those that may be available to you under the new law.