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Federal Housing Regulators Consider Expanding Refinancing Program for Homeowners Deeper Underwater

June 23, 2009

The agency that regulates mortgage lenders Fannie Mae and Freddie Mac may allow deeper-underwater homeowners to take advantage of federal foreclosure-prevention plans, Bloomberg News reported June 19. The Federal Housing Finance Agency's change would apply to the refinancing option in the Obama Administration's foreclosure-reduction plan. As things currently stand, homeowners who owe more than 105% of their homes' value on their mortgages are ineligible for the refinancing option. The new ceiling hasn't been decided, but the FHFA director said 125% was one number being considered. The goal is to increase slowing participation in the program, which has already helped refinance 80,000 loans.

The 105% limit was intended to stop abuses by people who took out large loans they couldn't repay. Unfortunately, it also disqualifies many people in volatile housing markets like Southern California, where home values have plunged dramatically from their highs earlier in the decade. According to real estate information firm Zillow, about 20.4 million of America's 93 million homes are "underwater," which means they owe more than the property is worth. An analyst from Credit Suisse said a 125% cap would help 10% of Fannie/Freddie borrowers (who are eligible for the foreclosure-reduction program), leaving out another 4% who are even deeper underwater.

This is huge news for Orange County loan modification lawyers like us. According to March numbers from the Los Angeles Times, nearly a third of homeowners in Southern California are underwater. This change probably wouldn't help all of them, but it would give a substantial number another way to keep their homes. Refinancing is easier to get than loan modifications because the lender doesn't face any loss -- it simply replaces one loan with another. In the best cases, that also benefits homeowners by giving them a chance for lower loan payments and a more stable loan structure. However, because home values have dropped, many homeowners have lost the equity they need to refinance. That's the problem the federal refinancing program seeks to solve.

Anaheim-based Howard Law LLP represents homeowners throughout Southern California who are struggling with outsized mortgage loan payments. Our Leucadia loan modification attorneys have successfully negotiated to change the structures of exotic or adjustable-rate mortgages, lower interest rates and take other steps to lower our clients' monthly payments. We are not one of the brand-new and ethically questionable loan modification companies you may have read about; we are Chino loan modification attorneys with years of experience in debt and consumer protection law. Unlike non-lawyers, we face career-ending legal consequences for taking advantage of our clients. We cannot guarantee any result ahead of time, but we can promise that we will work our hardest to get clients a result that keeps them in their homes, lowers their payments to a realistic number and minimizes the damage to their financial lives.

Howard Law offers free, confidential consultations to potential clients, so there's no risk in speaking to us about your case. To set up a meeting, you can contact us online or call toll-free at 1-800-872-5925 today.