FHA launches mortgage help program

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WASHINGTON — The Bush administration on Wednesday rolled out a program that aims to help thousands of struggling borrowers refinance into more affordable government-backed mortgages and thus provide some relief for the foreclosure crisis that has contributed to crippling the financial markets.

The $300 billion Federal Housing Administration program was part of a broader housing rescue bill enacted this summer. By law, its details could not be released until Wednesday. It will take a few days for lenders to get it up and running — if they choose to participate.

Borrowers who took out a mortgage on or before Jan. 1 can apply if they have made at least six payments on their existing loan and they do not own a second home. If their lender goes along with the deal, they can refinance into a 30-year, fixed-rate loan.

They will need to verify that they cannot pay their loan without help and that their monthly payments were more than 31 percent of their gross monthly income as of March.

"This program is one more tool" for homeowners and lenders, said Steve Preston, secretary of housing and urban development.

The Congressional Budget Office estimates that the new Hope for Homeowners program could help 400,000 people during its three-year life span.

"But compare that to the fact that we had 300,000 foreclosure filings in the last month alone," said John Taylor, chief executive of the National Community Reinvestment Coalition, a housing advocacy group. "Have no illusions, this is going to help some homeowners, but it's not going to solve the foreclosure crisis by any stretch."

The final participation numbers will depend largely on lenders. The FHA doesn't make loans directly; it insures loans by private lenders.

In this program, the FHA will insure a loan for only 90 percent of the home's current value. With home prices plunging, borrowers who have little or no equity left in their homes need the lender to forgive the rest of the debt to qualify for the refinancing.

Some lenders have resisted doing that in the recent past, preferring instead to lower interest rates or rearrange payment schedules on troubled loans. "Lenders are looking at this as a last resort," said Guy Cecala, publisher of Inside Mortgage Finance.

Borrowers interested in more information can go to www.fha.gov or call 800-CALL-FHA.

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