The sweeping economic reform of the United States government included the passage of HR 3221, which is part of the Housing and Economic Recovery Act of 2008. Signed into law by President George W. Bush, HR 3221 will provide needed relief to more than 400,000 American families facing foreclosure on their mortgages.
How the housing bill can help you
HR 3221 works to refinance your home’s mortgage for up to ninety percent of its current fair market value. The Department of Housing and Urban Development (HUD) administers the refinancing program under HR 3221. To qualify for assistance refinancing your mortgage, you must meet the HUD guidelines outlined by the government for this program.
Guidelines for refinancing under HR 3221
The first thing the government wants to see is that you can actually afford the house you live in. Many borrowers find themselves where they are today because of the subprime lending industry and its willingness to lend money for home purchases to anyone who asks, in what is now known as the subprime boom. You must show that you have disposable income and that your mortgage prepayment will not exceed 29% of your entire family’s combined income. If your combined household income is $5,000, then your mortgage payment cannot be more than $1,450.
Also, your lender must agree to absorb a loss when you purchase your mortgage. HR 3221 allows the Farmers Home Administration to purchase mortgages from lenders at 85% of their current fair market value, with closing costs not to exceed 90% of fair market value, with closing costs and the mortgage together.
Alternatives to Refinancing HR 3221
Not all homeowners will qualify for home rescue under the HR 3221 refinance structure. You may be among them if you cannot prove or verify that your combined household income is adequate enough to pay FHA when they purchase your mortgage up to 90% of the current fair market value, or if your lender does not agree to the purchase outright. If you can’t take advantage of the HR 3221 refinance program, you can always find your own form of mortgage refinance.
There are many lenders who continue to refinance mortgages despite the market downturn. By refinancing your mortgage now, you can avoid foreclosure. The lender will write a new loan, effectively buying out your mortgage and allowing you to get different terms that are easier to manage with your current income. Many times, the refinanced mortgage will be written for a longer period of time, up to thirty years.
You can also find lenders willing to help you save your home online. Online lenders have more capital to invest than your local bank and are therefore more willing to take the risks associated with mortgages in today’s real estate market.
