Congress Aims To Make Things Easier For Borrowers

by : M. Hammer

The government is doing all that it can to help high risk borrowers secure mortgage loans and a recent piece of legislation is evidence of that. With the Federal Reserve Board taking steps to cut federal interest rates recently, the United States House of Representatives is looking to help out sub prime lenders who are thought to have caused the real estate market turmoil to begin with.

The bill, which is expected to run through the House soon, is called the Expanding American Homeownership Act. It seeks to help people secure mortgage loans by expanding the capability of the Federal Housing Authority to take on more at risk borrowers. These risky propositions are often too dangerous for banks to consider, but the Federal government hopes to help these people out with their own insurance policy.

The primary goal of the new bill is to give power to the FHA, which stands as the biggest insurer of mortgage loans in the world, to give service to those who might otherwise negatively impact the regular market were they to secure loans through a standard lender. These folks, according to the thought of the federal government, are the kind that would fall victim to excessively high mortgage rates and fall into a huge financial pit with banks.

The bill was first introduced by Representative Maxine Waters of California. Mrs. Waters made comments that indicated her desire to help out those customers who had been pushed into unsafe mortgage loans before. In addition, she indicated that the new bill would do much to help out young home buyers who were getting their feet wet in a market full of tired lenders. There is speculation that the House will pass the bill, as it has gained widespread support among many of the more powerful representatives.

The bill itself is meant to give the FHA more options with which to operate. Their goal had already been to insure high risk mortgages, but now they hope to take it to another level. The bill would give the FHA a chance to charge higher interest rates in conjunction with taking on riskier loans. This would help the government protect itself, while also keeping sub prime borrowers from predatory treatment. In addition, the bill would enable the FHA to insure no money down loans and other low down payment loans, which favor young buyers. This interest in the first time home buyer is an essential aspect of this piece of legislation.

The bill also hopes to offset the rising cost of mortgage loan insurance premiums. These have been rising steadily and the bill would curtail that increase unless there was a primary need for such a rise to cover the cost of insurance claims.

Certain areas of the country would be likely to see a greater benefit from the bill. Places like California, Massachusetts, and New York are known to have larger, pricier loans because of the cost of property in those areas. Because the FHA has long been limited in how much money it can spend to insure a loan, it has been priced out of these markets. Now, it will have an opportunity to participate there, where home values seem to be on a constant rise.

There is another element to the bill which should help the overall real estate market in the long term. It would give the United States Department of Housing and Urban Development the right to assign counseling to home buyers prior to approving a low down payment loan. This change would help create a much more educated home owner base and reduce the chances that a foreclosure could occur. The long term ramifications of such a move could help bring the real estate market out of the downtick that it current faces.

Thus far, there has been good reaction for the legislation from those who provide mortgage loans. The Mortgage Bankers Association, which is a powerful group, has lent its support to the bill at this early stage. There are aspects of the bill which the MBA does not favor, however. A piece of the bill which mentions a long term housing trust is something that, according to the MBA, has the ability to delay the process.

A commitment has been within Congress to protect consumers from any form of unfair treatment. Financial regulators and mortgage loans providers need to do more in this regard, according to many of the House's top legislators.

One way of doing this has been introduced in a bill that would enable the FTC to change guidelines about consumer credit information accuracy. This way, consumers wouldn't have to worry about mistakes and falsehoods in their credit report. Because credit has become so important, Congress knows that borrowers must be protected as much as possible in this regard if they are to qualify for mortgage loans.
These changes, on the whole, should effect some change in the current real estate market. By getting people on the right track to success, the entire system can find prosperity.