Struggling with Mortgage, but Staying in a Home

2008 July 19

July 20 2008 - As the foreclosure crisis worsens, government officials and industry executives seem to be growing more creative in addressing the problem. Two recent initiatives allow struggling homeowners who lose their mortgages to stay in their homes and work their way back to financial solvency.

A program in Detroit created this month by the federal Department of Housing and Urban Development is for borrowers with loans insured by the Federal Housing Administration, which typically deals with first-time home buyers.

Under this initiative, the F.H.A. will allow a lender to submit an insurance claim on a mortgage when it is in arrears but before it fails. HUD, which oversees the F.H.A., then transfers the mortgage to a company to service the loan and work with the borrower to restructure the loan to make it more affordable.

In announcing the program, the HUD secretary, Steven C. Preston, said it would not only help individual homeowners, but also diminish the impact that foreclosures tend to have on neighborhoods. Studies have shown that a single foreclosure can depress neighborhood housing values, because a foreclosed house usually sells at a discount, and empty homes can invite crime and diminish a neighborhood’s perceived value.

A second initiative, in New Jersey, is spearheaded by the Federal Home Loan Bank of New York, which lends money to roughly 300 local banks in New York, New Jersey, Puerto Rico and the United States Virgin Islands to finance mortgages.

Under this new initiative, called the Housing Assistance and Recovery Program, or HARP, the Home Loan Bank lent $6 million to Magyar Bank, based in New Brunswick, N.J.

Mortgages: Struggling, but Staying in a Home
by BOB TEDESCHI | New York Times

Blame to go around for perils of Freddie, Fannie
Giuliani Firm Plans Real Estate Investment Fund

Share