The newest proposal to combat foreclosures was recently unveiled in Washington. The plan, named “Help Now,” was proposed by the National Community Reinvestment Coalition (NCRC), a nonprofit community advocacy group. The NCRC, citing several innovative concepts, calls for the government to buy up at-risk loans, restructure the terms to make them affordable and sell the reworked loans back into the secondary market.

Help Now aims to improve upon the efforts of the alliance of lenders, mortgage servicers, non-profit community advocacy groups and investors led by the Bush administration to help troubled borrowers stay in their homes. The NCRC’s proposed Help Now approach will be more effective because it will make it easier for lenders to rework the terms of troubled mortgages. (more…)

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By early April, Congress is likely to finalize negotiations on a bill that would expand the reach of the Federal Housing Administration. The purpose of the legislation is to provide safe loan alternatives to subprime mortgages and make homeownership more accessible.

Different versions of the FHA modernization bill passed in the House and the Senate last year, and both Senate Banking Committee Chairman Christopher Dodd, D-Conn., and House Financial Services Chairman Barney Frank, D-Mass., said last week that the differences between the chambers could be resolved in short order.

The FHA program is intended for mortgage borrowers with weak credit or little or no cash who may not be able to otherwise get an affordable mortgage.

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Recent statistics compiles by the federal regulators tell us that more home owners than ever are losing the battle to make their monthly mortgage payments. Over 900,000 households are in the foreclosure process, up 71% from a year ago. That figure represents 2.04% of all mortgages, the highest rate in the report’s quarterly, 36-year history.

The foreclosure rates for prime and subprime adjustable rate mortgages both more than doubled compared with a year ago, from 0.41% for prime ARMs to 1.06% and from 2.70% for subprime ARMs to 5.29%. But it was subprime ARMs that contributed most heavily to the nation’s soaring foreclosure rates. Many of these loans come with low introductory rates that reset higher, often to unaffordable levels, in two or three years. (more…)

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Those that follow the mortgage industry say banks could face hundreds of millions of dollars in losses through loans to homebuilders and other developers. With commercial and residential real-estate prices declining, lenders of all sizes face a growing number of loan defaults from builders unable to sell houses and from developers whose properties are currently less desirable than originally anticipated.

Construction and development loans are loans made to builders for properties such as strip malls, office buildings and residential developments. They have been a key source of profit for small and midsize banks. The percentage of those loans that are 90 or more days past due rose to nearly 3.2 percent at the end of 2007, up from less than 1 percent a year earlier, and is now at levels not seen since the early 1990s. (more…)

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Paeans to homeownership are commonplace for American politicians, Democrats and Republicans alike. Ever since the nineteen-thirties, public policy has been designed to make home buying cheaper and easier. Pundits argue that homeownership has tremendous social benefits, stabilizing neighborhoods and making people more willing to invest in their communities. Furthermore, those promoting homeownership state that it has economic benefits, too, serving as a forced-savings program that allows people to leverage their incomes and build wealth.

Buying a home used to require a sizable down payment: in 1976, the average for a first-time buyer was eighteen per cent. By contrast, a National Association of Realtors study of first-time buyers between mid-2005 and mid-2006 found that almost half put down nothing at all, and that the median down payment was just two per cent. (more…)

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The White House is expressing concerns about the Democrats, bankers, economists and consumer advocates calling for a big-money government mortgage rescue program for struggling homeowners. Even Treasury Secretary Paulson branded many of the aid proposals circulating in Washington as “bailouts” for reckless lenders, investors and speculators, rather than measures that would provide meaningful relief to deserving, but cash-strapped, mortgage borrowers.

His comments came amid signs that the nation’s housing market is getting worse, not better. Indeed, at a recent House hearing, Federal Reserve Chairman Bernanke kept the door open to further interest-rate cuts to boost the economy, even as he warned that inflation pressures have intensified in recent weeks. (more…)

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