The House is expected on Wednesday to pass a $300 billion housing rescue bill aimed at helping troubled homeowners avoid foreclosure and supporting mortgage giants Fannie Mae and Freddie Mac. If the bill is then passed by the Senate and signed by President Bush, who today withdrew his threat to veto the legislation, thousands of at-risk borrowers will be able to refinance their unaffordable old mortgages into new, low-cost fixed-rate loans insured by the Federal Housing Administration. The Congressional Budget Office estimates that 400,000 borrowers with $68 billion in loans may benefit from the program - but the bill allows for as many as one or two million borrowers to participate in the program. Heres what homeowners need to know.



Whos eligible?

Qualified borrowers must live in their homes and have loans that were issued between January 2005 and June 2007. Additionally, they must be spending at least 40% of their gross monthly income on all household debt to be eligible for the program. They can be up-to-date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage - and attest that they are not deliberately defaulting just to obtain lower payments. Before a homeowner can get an FHA-backed mortgage they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless its to pay for necessary upkeep on the home. To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the homes appraised value at the time.

How can I apply?

Borrowers can contact their current mortgage servicer or go directly to an FHA-approved lender for help. These lenders can be found on the Web site of the Department of Housing and Urban Development. How does the refinancing process work? This is a voluntary program, so lenders holding the original mortgage have to agree to rework a given loan before things can get started. The bill requires lenders to make major concessions, writing down the value of the loan to 90% of the homes current value. In areas where prices have plummented by as much as 20%, that will mean a substantial loss for the lender. But lenders wont sign off on a workout unless they think that theyll lose less money on that than they would by allowing a home to go through the costly foreclosure process. Each loan will have to be underwritten by an FHA lender on a case-by-case basis. That means the banks will do a new appraisal to determine the homes current value, as well as examine and verify income statements, bank accounts, job histories and credit scores. Based on that new appraised home value, the FHA lender determines how much the original lender has to reduce the original mortgage by, so that it will reflect 90% of the homes market value. If the original lender agrees to the write down, the new lender buys the old loan and takes over the reworked mortgage. As part of the deal, the old lender writes off any fees and penalties on the original mortgage, including prepayment penalties, and accepts the proceeds from the new loan on a paid-in-full basis. Additionally it pays the FHA an up-front premium equal to 3% of the mortgage principal.

What does it cost?

There should be little up-front costs for borrowers to bear. Loan origination fees will vary by lender, but these can usually be paid by the borrower over the life of the loan in the form of a slightly higher interest rate. However, the refinanced loans do come with many strings. For one thing, borrowers are responsible for paying an insurance premium to the FHA guaranteeing the loan, which will be 1.5% of the principal annually. Borrowers also agree to share any profits from future home price appreciation with the FHA. To do that, theyll pay a 3% exit fee of the mortgage principal to the FHA when they resell or refinance. Plus, theyll agree to pay the FHA 100% of any profits they realize from higher home prices if they sell or refinance within a year. So if the original loan principal is $200,000 and the home sells for $250,000, the borrower will owe the FHA $50,000, minus costs. After a year, borrowers will share 90% of the profits with the FHA. The percentage keeps dropping in 10% increments to 50% after the fifth year, where it stays.

What will I save?

Savings depend on what borrowers are paying for their present loan and where they live, but for most people it will be substantial, even factoring in the FHA fees. In areas that have sustained huge price drops, such as Sacramento, where prices have fallen about 30% over the past year, some loans might be reduced by more than 40%. Additionally the FHA loans carry reasonable interest rates which are fixed for the life of the loan, as opposed to a subprime adjustable rate mortgage that can jump higher every six months.

The House is expected on Wed to pass a $300 billion housing delivery bill aimed at portion troubled homeowners avoid foreclosure and supporting mortgage giants Fannie Mae and Freddie Mac. If the bill is then passed by the Senate and sign-language(a) by Chief Executive Bush, who today withdrew his menace to veto the legislation, thousands of at-risk borrowers will be able to refinance their unaffordable old mortgages into new, low-priced fixed-rate loans insured by the Federal Housing Administration. The congressional budget post estimates that 400,000 borrowers with $68 billion in loans may benefit from the program - but the bill allows for as many as one or two million borrowers to participate in the program. Heres what homeowners need to know.

Whos eligible?

Qualified borrowers must live in their homes and have loans that were issued betwixt January 2005 and June 2007. Additionally, they must be spending at least 40% of their gross monthly income on all house debt to be eligible for the program. They can be up-to-date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paid their existent mortgage - and bear witness that they are not deliberately defaulting just to obtain lower payments. Before a homeowner can get an FHA-backed mortgage they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless its to pay for necessary sustainment on the home. To get a new home equity loan, borrowers will need commendation from the FHA, and total debt cannot exceed 95% of the homes appraised value at the time.

How can I apply?

Borrowers can middleman their flow mortgage servicer or go directly to an FHA-approved lender for help. These lenders can be found on the Web site of the Department of Housing and Urban Development. How does the refinancing action work? This is a voluntary program, so lenders holding the original mortgage have to agree to retread a given loan before things can get started. The bill requires lenders to make major concessions, writing down the value of the loan to 90% of the homes current value. In areas where prices have plummented by as much as 20%, that will mean a substantial loss for the lender. But lenders wont sign off on a workout unless they think that theyll lose less money on that than they would by allowing a home to go through the dearly-won foreclosure process. Each loan will have to be underwritten by an FHA loaner on a case-by-case basis. That means the banks will do a new appraisal to find out the homes current value, as well as examine and verify income statements, bank accounts, job histories and recognition scores. Based on that new appraised home value, the FHA lender determines how much the original lender has to reduce the original mortgage by, so that it will contemplate 90% of the homes market value. If the master copy lender agrees to the write down, the new lender buys the old loan and takes over the reworked mortgage. As part of the deal, the old lender writes off any fees and penalties on the master copy mortgage, including prepayment penalties, and accepts the proceeds from the new loan on a paid-in-full basis. Additionally it pays the FHA an up-front premium equal to 3% of the mortgage principal.

What does it cost?

There should be little up-front costs for borrowers to bear. Loan origination fees will vary by lender, but these can usually be paid by the borrower over the life of the loan in the form of a slightly higher stake rate. However, the refinanced loans do come with many strings. For one thing, borrowers are responsible for paying an insurance agio to the FHA guaranteeing the loan, which will be 1.5% of the principal annually. Borrowers also agree to share any profits from future tense home price taste with the FHA. To do that, theyll pay a 3% exit fee of the mortgage principal to the FHA when they resell or refinance. Plus, theyll agree to pay the FHA 100% of any profits they realize from higher home prices if they sell or refinance within a year. So if the pilot loan star is $200,000 and the home sells for $250,000, the borrower will owe the FHA $50,000, minus costs. After a year, borrowers will share 90% of the profits with the FHA. The percentage keeps dropping in 10% increments to 50% after the fifth year, where it stays.

What will I save?

Savings depend on what borrowers are paying for their present loan and where they live, but for most shack it will be substantial, even factorization in the FHA fees. In areas that have sustained huge price drops, such as Sacramento, where prices have fallen about 30% over the past year, some loans might be reduced by more than 40%. Additionally the FHA loans carry reasonable interest rates which are fixed for the life of the loan, as opposed to a subprime adjustable rate mortgage that can jump higher every six months.

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