Mortgage assistance plan could save the homes of many South Floridians

Troubled borrowers embroiled in the worst housing debacle in decades will get lifelines from the government and the banking industry.

The Federal Housing Finance Agency and other agencies said Tuesday they plan to speed up the process for renegotiating hundreds of thousands of past-due home loans held by Fannie Mae and Freddie Mac.

Tuesday's announcement, along with recent loan-modification strategies from major banks, could go a long way toward easing the nation's housing slump.

"This will be a way to keep people paying their mortgages, staying in their homes and breathing a little bit," said Paula Siegel, 60, a Boynton Beach resident who hopes to benefit from a loan restructuring by Countrywide Financial Corp.

Citigroup, Bank of America and JP Morgan Chase & Co. have agreed to modify delinquent mortgages after getting money from the federal government. As part of the $700 billion bailout, the U.S. Treasury is handing out cash to recapitalize struggling banks.

South Florida, in particular, has been hammered by plummeting home prices and foreclosures during the past few years. Many people stretched to buy homes they ultimately couldn't afford.

One in every 124 households in Broward County was in foreclosure in September, according to RealtyTrac, an Irvine, Calif.-based company. One in every 238 households is facing foreclosure in Palm Beach County. RealtyTrac is set to release October numbers on Thursday.

"It's time that the government is taking the bull by the horns and helping the people down at the bottom who need help the most," said Lew Freeman, a banking consultant in Fort Lauderdale and Miami.

Fannie and Freddie, taken over by the federal government in September, own or guarantee nearly 31 million U.S. mortgages. Officials do not yet have an estimate of how many people would qualify for the new program, which goes into effect Dec. 15.

Borrowers would have to be at least 90 days behind on their home loans and would need to owe 90 percent or more than the home is currently worth. Excluded would be investors who do not occupy their homes and borrowers who have filed for bankruptcy.

Borrowers would benefit by getting reduced interest rates and having loans extended from 30 years to 40 years. In some cases, the principal amount would be deferred interest-free.

"The most important element is the principal write-downs," said Brad Hunter, a housing analyst based in West Palm Beach. "Modifying loans to lower the interest rates helps some, but not enough."

Citigroup said late Monday it is freezing foreclosures for borrowers who live in their own homes, have good incomes and stand a decent chance of making lowered mortgage payments. The bank is targeting homeowners in Florida and other states with large unemployment and foreclosure rates. The program is expected to affect about $20 billion in mortgages.

Late last month, Chase expanded its mortgage modification program to an estimated $70 billion in loans.

There's no public record of large regional players such as Fort Lauderdale-based BankAtlantic and BankUnited of Coral Gables taking the government handouts, said Ken Thomas, a Miami-based economist and banking analyst. Until then, they may not be so willing to modify home loans, he said.

"Once they're approved for government assistance, I would expect them to follow a similar [loan-modification] program," Thomas said.

Bank of America said it will modify an estimated 400,000 loans held by newly acquired Countrywide as part of an $8.4 billion legal settlement reached with 11 states, including Florida, in early October.

Even though banks stand to lose money on the renegotiated mortgages, "they'll still have people in the houses protecting their interest," Thomas said. "The last thing you want to see in a neighborhood is newspapers out front and the grass three feet tall."

This report was supplemented by the Associated Press

Paul Owers can be reached at powers@sunsentinel.com or 561-243-6529.

source: sun sentinal

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