New Foreclosure Laws

In an effort to slow down the number of foreclosed properties that began emerging on the market between 2006-2007, President Bush and the Senate began the process of enacting new laws related to homeowners and foreclosures. These laws were meant to help homeowners stay in their homes without facing extreme interest rate hikes and large mortgage payments.

The Foreclosure Prevention Act of 2008 was set into motion in April 2008 as a means of alleviating the heavy burden of foreclosures due to subprime lending. The law includes such things as providing foreclosure prevention counseling to families that are facing foreclosure. It is also meant to assist cities and areas that have been devastated because of foreclosure by purchasing homes in foreclosed areas and fixing them up for resale.

Another large portion of this bill is revamping the policies within the Federal Housing Administration. This includes expanding the cap on the mortgage loan amount available to interested homeowners, as well as reducing the down payment to 3.5% for qualified homeowners. Revamping the FHA policies also includes allowing for more potential homeowners to be qualified for FHA loans.

This law also brings about a variety of other important incentives that the Senate and Congress are hoping will get the real estate market back on track. These incentives include a $7,500 tax credit for first time homebuyers. It has also increased the rate of Veterans Administration loans and has loosened the rules for active duty personnel in regards to foreclosure and mortgage payments. This is in response to a large number of active duty military personnel that are away from home at war and unable to make mortgage payments and have been foreclosed on.

Many states have also begun enacting their own laws to help alleviate the financial burden that many homeowners are beginning to experience due to the current real estate market. California has one of the highest foreclosure rates of any state in the U.S. Although the bill is still in the process of being passed, the California Senate is seeking to put stricter limitations and fines on the actual lenders.

One of the suggested policies would include fines for lenders that do not upkeep their foreclosed properties. This is in hopes of maintaining local communities, as well as limiting the number of foreclosures each lending institution takes on.

Another portion of the bill will include extending the amount of time between when a lender first contacts a homeowner and when the lender can begin the foreclosure process. This is again in hopes of limiting the extremely high foreclosure rate throughout many populated cities in California.

Each state has specific foreclosure laws and many states are beginning to look for ways to change antiquated laws that no longer work with the current real estate market. Be sure to contact your state or local government to find out what new laws are in the process in your area.