What the Housing Relief promises to do
At the heart of Obama's housing relief program is a two-step process his administration is implementing to help responsible homeowners, specifically service members and veterans, to avoid foreclosures and retain their homes. The process also aims to help those whose homes have been unfairly foreclosed or denied lower interests on their mortgages, as well as communities adversely impacted by the housing crisis. The relief is expected to benefit thousands of men in uniform and veterans and comes after a historic $25 billion housing settlements the Federal government entered into with the Attorneys General from 49 states completed in February this year.
The First Step
This involves providing relief to servicemen and veterans that already started with the $25 billion settlement. Under this step, the administration is expected to conduct the following:
• Review foreclosures suffered by servicemen and veterans dating back to 2006 and overseen by the DoJ's Civil Rights Division and those found wrongly foreclosed will be compensated with $116,785 plus an amount equal to the minimum of the lost home equity plus interests, or the amount stipulated under the Servicemember Civil Relief Act (SCRA) for violations resulting from a review by banking regulators;
• Review the files of service members dating back to 2008 and refund money lost because they were wrongfully denied the opportunity to reduce their mortgage payments through lower interest rates or wrongfully charged with interests higher than 6% on their mortgage in violation of SCRA. Those charged above the 6% ceiling will be entitled to a refund equal to no less than 4 times the amount charged.
• Provide financial relief to servicemen forced to sell their property for amounts less than their outstanding mortgage balances resulting from a Permanent Change in Station (PCS). The Homeowners' Assistance Program (HAP) of the Department of Defense stipulates that servicemembers forced to sell their homes at a loss due to PCS may be compensated for any loss in the sale. Under Obama's housing relief, the government will provide deficiency waivers and short sale agreements to similarly situated servicemembers but are not eligible for HAP. The implication here is that the benefits of HAP will be extended to servicemembers who acquired property between July 1, 2006 and December 31, 2008, or who received a PCS after October 1, 2010.
• Provide the Veterans Housing Benefit Program Fund with $10 million dollars through which the Department of Veterans Affairs can guarantee loans to eligible veterans on favorable terms for veterans; and.
• Support servicemen who had served in harm's way or are receiving Hostile Fire/Imminent Danger Pay with certain protections against foreclosures as allowed under the SCRA. The law prohibits the foreclosure of active duty servicemen's home without getting a court order provided their mortgages were secured prior to be being assigned on active duty. The relief program extends foreclosure protection to all servicemen regardless of the date mortgage was secured and who received the Hostile Fire/Imminent Danger pay and were stationed outside of their domicile within 9 months of a foreclosure notice
The Second Step
This involves reducing fees for borrowers wanting to refinance their existing mortgages. The Federal Housing Authority (FHA) would normally charge 1% of loan balances upfront plus 1.19% annually for insuring refinanced mortgages. FHA will cut its processing fees to 0.01% upfront for refinancing federally insured mortgages plus half of 1.19% (0.55%) every year on the refinance mortgage. Some 2-3 million mortgage holders could benefit from savings of around a thousand dollars annually through refinancing which they would not otherwise get under the current FHA fee structure. A typical FHA mortgage owner who wants to refinance a $175,000 outstanding balance on his mortgage can realize about $1,010 in monthly savings in monthly loan insurance payments.
Quite apart from the election period that saw much of the energies of the incumbent president and his administration sapped during the campaign period, there has been little progress on many of the promised programs outlined in Obama's SOTU last March 2012. That included his housing relief for the military, and much of his overall relief to the general homeowners refinancing their mortgage failed to gain momentum. Congress has not moved at all to legislate the needed bill that would have allowed more homeowners to benefit from lower interest in refinancing their mortgages. On the other hand, newly-appointed New York Attorney General Eric Schneiderman was able to bring two major banks to court - Bear Stearns and Credit Suisse, as part of Obama's SOTU promise to investigate abusive lending practices that have led to the current housing crisis. Now that he has been re-elected, it would appear that his housing relief program that would revitalize the housing markets will need more executive action than legislative fiat to get it going.
It is interesting to note that 6 months down the road, the official blogsite of the VA does not even mention Obama's two-step housing relief that is supposed to pump in $10 million into its coffers to guarantee low interest loans to eligible veterans. Instead, it credits the late President Roosevelt who signed the 1944 GI Bill into law that enabled veterans to have lo interest loans when purchasing their homes.
Conclusion
Obama's two-step housing relief for military servicemen and veterans remain promising for those who have suffered unjust foreclosures, hikes in interest rates, and those forced to sell their devalued homes dues to PCS issued during the country's worst housing crisis. It may be too early to tell if the program has achieved its objectives as the benefits promised may not be readily noticed until after the overall housing market slump, along with the nation's economy, has improved. With his 2nd term in the White House, Obama has the least four years of his presidency to prove that he can muster the will and the support from Congress to undertake the needed measures encouraging lenders to keep lending at low interest rates and slowly rebuilding consumer confidence towards achieving some sense of normalcy in the housing markets. It may come too slow for many, but this is certainly better than getting worse.
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