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Tips on keeping your home

November 25, 2007

Consumer advocates, financial institutions and politicians on every level are scrambling to find ways to help people keep their homes.

Here are some of the efforts:

Foreclosure prevention. Would provide an additional $200 million in funds targeted to HUD-certified agencies that offer foreclosure prevention counseling. Legislation is included in a spending bill.

Mortgage broker accountability. Would create a national standard to hold mortgage brokers responsible for making loans that borrowers can afford. The House bill, spearheaded by Rep. Barney Frank (D-Mass.), would create a federal licensing system. Sponsored by Sen. Charles Schumer (D-NY) the Senate version would upgrade standards that mortgage brokers and originators must abide by when making new loans. While the House has passed its bill, the Senate's version must still go through banking committee.

Bankruptcy code amendments. Would exclude home loans from other debts that must be repaid through bankruptcy process. Some versions of bill would allow judges to modify loan terms. Bill awaiting hearings in both houses.

Tax law modifications. Would allow homeowners to avoid paying taxes on debts forgiven by lenders restructuring loans. Legislation has been introduced in the Senate and is awaiting hearing. It passed in the House.

Federal Housing Administration loan limits. Would temporarily increase loan limits that FHA could make to $417,000, from $362,790. The increase would allow FHA to back more loans, helping more homeowners to qualify for mortgages. The bill passed the House and is awaiting a vote in Senate.

Fannie Mae and Freddie Mac changes. Would increase Fannie Mae and Freddie Mac loan limits to the lesser of either the area median home price or to $625,500, up from $417,000. And it would temporarily lift the limits of the mortgage portfolios held by the companies by 10 percent and require that 85 percent of the increase, approximately $125 billion, fund refinancing of subprime borrowers. The bill passed the House and is awaiting hearing in the Senate.