Legislators Confront Housing Issues. Will it affect the Chico Housing Market?
April 27th, 2008categories: Chico CA Real Estate News
by Mike Wiegert
Regardless of anyone’s political contentment or not, it’s undeniable that the Federal government is concerned about the housing and mortgage credit crisis. Two new bills have been introduced into legislation by the House Financial Services Committee directed at dealing with the increase in foreclosures and promoting the growth of single family home ownership for lower income families in dire need of housing.
The first bill introduced last month is H.R. 5830, the FHA Housing and Retention Act. This measure essentially grants money and more authority to the Federal Housing Administration (FHA) to assist borrowers at risk of losing their homes through foreclosure and provide affordable mortgages. The bill also requires the Federal Reserve Board to conduct a study on the necessity of an auction or bulk refinancing mechanism.
The second bill is H.R. 5815, the Neighborhood Stabilization Act of 2008 introduced by Subcommittee on Housing and Community Opportunity Chairwoman, Maxine Waters. This measure stipulates guidelines that when met will provide loans and grants to states and cities to confront the regional and local Chico foreclosure epidemic.
The new FHA Housing and Retention Act is a $300 billion measure the establishes a voluntary program authorizing FHA to provide new guarantees to borrowers who are at risk of defaulting on existing homes loans. The authorization would only be available in instances where the amount recovered from the foreclosure would be below the outstanding principal of the loan. In these cases, the existing lender would be offered a “short payment”, an amount less than the principal balance of the loan but certainly more that the lender would be expected to glean from foreclosing and then reselling the property. A new affordable mortgage would be offered to the borrower at approximately 90 percent of the homes current appraised market value. The program includes a “soft” second mortgage owed by the borrower to cover FHA’s closing costs. An additional provision of the bill states that the borrower, upon sale of the property, would pay an “exit” fee amounting to 0-3 percent of the profit on the home depending upon the time period the borrower owned the home.
The Neighborhood Stabilization Act of 2008, creates a $15 billion U.S. Department of Housing and Urban Development (HUD) loan and grant program. The intended purpose of the program is to provide funds for loans and grants for the purchase and rehabilitation of vacated foreclosure homes, thereby stabilizing neighborhoods. The measure divides the funds equally into $7.5 billion for loans and the other $7.5 billion for grants. Each state would be allocated these funds based on their percentage of foreclosures over the last four quarters and then adjusted to take into account the State’s median home price. It’s certainly predictable that California with it’s high rate of foreclosures and equally high median home price to be a large recipient of these funds. In this instance, California will have ultimate authority to direct and delegate the use of these funds to localities. Unfortunately, these funds are to be directed to the more highly populated cities in the state, so many of our north state cities are not likely to see these funds coming our way.
Seems a bit unfair that our north state tax dollars will be going into a program to assist beleaguered homeowners in other parts of the state while subsequently denying at risk borrowers in Chico, doesn’t it?
I’m sure a few Congressmen are going to get letters over this issue. Well, that’s Democracy at it’s finest!
