Daily Real Estate News | Monday, February 09, 2015
The director of the Federal Housing Finance Agency told reporters he’s investigating how to allow debt cuts for a group of borrowers who owe more than their homes are worth — a move the agency has in the past has refused to ever take.
However, FHFA’s Director Melvin L. Watt, who has been at the helm at FHFA for just over a year, says he wants to consider reducing the principal on underwater properties, but he realizes such a move can’t come at the cost of taxpayers. FHFA is the overseer of mortgage finance giants Fannie Mae and Freddie Mac.
About 5.1 million home owners — or one in 10 of owners who have a mortgage – still had negative equity in the third quarter of last year, according to CoreLogic housing data. While home prices nationwide have been recovering, the number of underwater home owners has been gradually decreasing in recent months.
In November 2014, FHFA had announced a new policy to permit some foreclosed home owners to repurchase the homes they once had lost at fair market value. The move sought to help lower the principal on the loans of the former home owners if they did to decide to buy their former homes back. Prior to the policy, the FHFA required borrowers who had gone through foreclosure and wanted to repurchase their homes to pay the entire debt they owed on the mortgage, even if it was much higher than the home’s current value.
Read more: FHFA Allows Ex-Owners to Buy Back Homes
Additionally, Watt told reporters that he has no plans to expand the terms of the Home Affordable Refinancing Program, which allows borrowers with loans backed by Fannie Mae and Freddie Mac to refinance into lower interest rates, even if their homes have lost value. The program is set to expire at the end of this year.
Source: “FHFA’s Watt Says Debt Cuts Possible for Underwater Homeowners,” Bloomberg News (Feb. 4, 2015)
Reprinted from REALTOR® Magazine Online, February 2015, with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright February 2015. All rights reserved. http://realtormag.realtor.org