Help Is On the Way for Those Facing Foreclosure

Appearing in the Detroit Free Press
Tuesday, Nov. 18, 2007

By Alphonso Jackson

Henry Ford once wrote that his "ambition is to employ more and more men." Why? To "help build lives and homes."

Ford understood the value of homeownership. It creates healthy families and stable communities and builds equity over generations. It should be an anchor of stability in uncertain times.

Unfortunately, in Michigan, that anchor is becoming unmoored. The birthplace of the auto industry has one of the nation's highest unemployment rates. As jobs are lost, homes follow: more than 14,000 foreclosures have been filed this year, 81 percent more than in 2006.

We are doing something about it.

On Nov. 15th, the U.S. Department of Housing and Urban Development (HUD) will sponsor a homeownership workshop in Detroit to help families in financial difficulty keep their homes (2 p.m.-8 p.m., at Metropolitan United Methodist Church, 8000 Woodward, Detroit; for information call (800) 225-5342, 8 a.m.-8 p.m., and select option 9).

The first step is overcoming fear. Early communication between homeowners and lenders is critical.

At the HUD workshop, homeowners will be able to speak with lenders and mortgage company representatives face-to-face. Lenders want to avoid foreclosure, too.

HUD-approved housing counselors will also be on hand to help home buyers understand the fine print.

During the housing boom, many homeowners were steered into adjustable rate mortgages. Now the bill is coming due. More than $1 trillion in rate resets are expected during the next five years.

In other cases, unscrupulous lenders and brokers pushed risky and unsafe products, such as downpayment-free "piggyback loans" or "liar loans," in which a borrower's income is unverified.

HUD is going after predatory lenders. But we must do more. We need to make homeownership a source of stability once again.

At the workshop, consumers will learn of a new refinancing product from HUD's Federal Housing Administration called FHASecure. For the first time, it allows homeowners in default because of interest rate resets to obtain safe, affordable, government-backed loans. Families still current on their loan can also qualify.

There are rules. A history of on-time mortgage payments under the original interest rates and a sound debt-to-income ratio are required. Under FHASecure, the average subprime homeowner would save about $400 a month, and an estimated 240,000 homeowners would keep their homes.

Foreclosure doesn't just hurt families, it devastates neighborhoods. We must help those communities recover.

Beginning Thursday, prospective home buyers in Michigan and Ohio also can purchase a HUD home with a $100 downpayment when using an FHA-insured mortgage. FHA-financed buyers will also obtain a $2,500 sales allowance at closing ($1,000 if alternate financing is used).

This can be used toward closing costs, to pay down the mortgage, or to make home repairs through HUD's Purchase and Repair program, which helps revitalize neighborhoods hard-hit by default.

More and more Michiganders are choosing the safety and security of an FHA loan: refinancing has increased 140 percent since 2005.

Many more consumers could take advantage if Congress modernizes the 73-year-old FHA. Eighteen months ago, President George W. Bush proposed a bipartisan bill to lower FHA's downpayment limits and raise its loan limits.

These new FHA products will strengthen homeownership and the families who choose it.

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