Federal Housing Administration Encourage Lenders To Forgive Mortgage Debt

The new mortgage aid program would be the third mortgage aid program geared towards helping homeowners. In a recent radio address President Bush spoke about “Hope Now,” which was enacted in October 2007. “Hope Now” is responsible for helping over 130,000 homeowners refinance their home and avoiding a possible foreclosure.

If the proposal for the new mortgage aid program is approved, the program is a win for homeowners and mortgage lenders alike. The program is geared for homeowners who currently owe more than what their home is worth, which makes refinancing the mortgage virtually impossible. The mortgage aid program would allow the government to offer financial backing to lenders who forgive homeowners who owe more than their home is worth.

This could be a big momentum swing for lower and stable mortgage rates. Bernanke has done everything possible by cutting interest rates to try to get mortgage lenders to follow suit and lower mortgage rates. The reason mortgage lenders are weary about lowering mortgage rates is because they are taking huge losses in their real estate and mortgage investments.

When the new mortgage aid program is enacted lenders will be able to free up cash to make available for new mortgage investments by selling off bad debt to the government. By buying the debt, the government is making a statement that they will make necessary moves for both homeowners and mortgage lenders to help get America’s economy get back on track.

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