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New Federal Support for Struggling Homeowners

heroic investing logo and graphicThe recovery of the housing market continues apace, prodded by an array of Federal interventions aimed at keeping mortgage rates low and propping up vulnerable homeowners who might otherwise end up in foreclosure. Now, the government is ushering in the New Year with plans for a new round of homeowner support by putting more loans in the hands of government backed bodies – a move expected to have implications not just for the health of the housing market but also of the economy as a whole.

The much publicized housing collapse of 2008 – a phenomenon also called the subprime mortgage meltdown and other names descriptive of what happened – had much to do with the plight of millions of so-called “subprime” borrowers. These were homeowners with risky credit and payment histories who managed to qualify for a mortgage anyway as part of the wholesale granting of mortgages by major lenders.

Many of these homeowners ended up in default, their cases either backlogged in the pipeline or ignored altogether. But numerous others continued to hang on, barely staying afloat with payments and missing some as well. That’s when the federal government instituted the first of its homeowner interventions – a mortgage bailout system that offered resources and information to help people avoid losing their homes to foreclosure.

But earlier versions of these homeowner support programs limited eligibility to only those whose loans originated with government backed lenders such as Fannie Mae and Freddie Mac –even if the loans were serviced by a secondary lender such as a bank or credit union. Those requirements sent homeowners scrambling to find out who actually owned their loans, only to learn in many cases that in fact their loans originated with an entity not included on the list of qualifying lenders.

For those who did qualify, the bailout programs provided refinancing options with lower rates and a variety of other services including credit counseling and budget planning. Through these efforts, over 300,000 homeowners were helped to keep their homes.

Now, a plan to expand homeowner support is on the table, with thousands of mortgages backed by a variety of lenders to be transferred to the ownership of entities such as Fannie and Freddie. It’s a move intended to ease the immediate burden of mortgage debt while, in theory at least, freeing more money to be returned to the economy through buying goods and services.

The scheme isn’t without it s obstacles, though – chief among them being the need for congressional approval to amend the charters of Fannie Mae and Freddie Mac to allow for the transfer of outside mortgages to those agencies. In any event, federal homeowner relief efforts can change the housing landscape in significant ways, with effects on the overall economy as well as options available to heroic investors following Jason Hartman’s guidelines for building wealth from income property

The Heroic Investing Team

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