The past few years have been some of the most difficult economic years in our country’s history. With unemployment riding at a real time high between 14 and 17 percent (yes, I’m aware that the “official” unemployment rate is recorded as 8.3 percent, but it fails to include several key factors) and most new jobs being created averaging only $11 an hour, many families throughout America are struggling to just maintain – and as a result, there are more than one million more homes expected to be foreclosed this year.
So the President is launching a new plan that hopes to eliminate the massive red tape experienced by many previous homeowners and one that will save homeowners thousands of dollars a year. One of the prime target markets for his new plan is military families.
Under the President’s plan, borrowers with mortgages insured by the Federal Housing Administration would be able to refinance at half the fee that the FHA currently charges. The fee is now 1.15 percent of the mortgage balance each year. Those fees are unappealing to many borrowers who want to refinance.
The plan would cut the fee to 0.55 percent and it will also require lenders to review the records of every military service member who has gone through foreclosure since 2006. If the service member was foreclosed on wrongly, the bank will have to pay them back the lost equity plus interest. Mortgage lenders would also have to refund money service members lost because they were denied lower interest rates. The proposal would also compensate service members who lost money during a short sale because of a change in station.
While not a total fix, the administration says a typical FHA borrower who refinances could save yearly more than $1,000 from the changes.
Economists said the lower fees are a modest way to help the troubled housing market but won’t turn it around. “The only thing that will do that is low interest rates and job growth,” said Susan Wachter, a professor of real estate at the University of Pennsylvania’s Wharton School.
Stan Humphries, chief economist at the real estate website Zillow.com, predicted that a separate plan to compensate military service members who were wrongfully foreclosed upon would be a big help to that group.
The jury is out – one thing is for certain, banks typically don’t want the press related to military families losing their homes to foreclosure – so this may just be a step in the right direction.
Michael Schindler, Navy veteran, and president of Edmonds-based Operation Military Family, is a guest writer for several national publications, author of the book “Operation Military Family” and “The Military Wire” blog. He is also a popular keynote and workshop speaker who reaches thousands of service members and their families every year through workshops and seminars that include “How to Battle-Ready Your Relationship” or “What Your Mother-in-Law Didn’t Tell You.” He received the 2010 Outstanding Patriotic Service Award from the Washington State Department of Veterans Affairs.