Changes in Law Add to Need for Counseling.(Credit Counselor)

Byline: Amilda Dymi

Financial rescuing and foreclosure prevention are overwhelming conversations within the industry and at the kitchen table. Most lenders have to deal with those clients. Most of us know someone desperately trying to save their home and hopeful the new Housing Bill and various government sponsor measures will save them.

It also means credit counseling is becoming more work intensive to ensure the helping and the saving is done in compliance with new requirements. At least from the educational perspective, suddenly both lenders and borrowers are in the same boat.

For example, the FHA Foreclosure Rescue Program, which represents a new FHA program to refinance 400,000 struggling or delinquent homeowners into government-insured fixed-rate mortgages requires that mortgage holders "agree to reduce the LTV ratio to at least 90% and pay a 3% upfront FHA mortgage insurance premium."

As the foreclosure rescue program starts on October 1, 2008, "Borrowers must share future appreciation with FHA and pay a 1.5% annual FHA insurance premium," which is three times higher than the current annual premium. It also requires all second or subordinated liens to be extinguished voluntarily before a troubled loan can be refinanced.

First-time homebuyers receive a $7,500 tax credit that works like an interest-free loan, but they need to know however, they need pay it back within the following 15 years. Lenders and servicers on the other hand, need to know the program provides $11 billion in mortgage revenue bond money for refinancing subprime borrowers, loans for first-time homebuyers and financing of affordable rental housing.

The credit crisis has brought about a long-term benefit to customers and the mortgage industry, some industry insiders say. Finally the mortgage industry is being regulated. The new housing bill requires background checks, testing, registration in a national ...