US Watchdog Eyes Zero Interest Mortgage Plan

December 21, 2011
Financial Times 
mortgage lending news

The Federal Housing Finance Agency is considering a "principal paydown plan" that would allow bankruptcy judges to grant underwater mortgage borrowers in Chapter 13 proceedings a five-year reprieve from interest rates. Housing experts have underline principal balance relief as the best avenue for propping up the battered market, which is being dogged by $700 billion in negative equity. According to CoreLogic, about a quarter of homeowners owe more on their mortgage than the property is currently worth. And the National Association of Consumer Bankruptcy Attorneys estimates that half of all pending bankruptcy cases involve residential mortgage claims. Although the White House is not considering the plan, the FHFA does not need congressional approval to implement the initiative, which would target homeowners with government-insured loans.
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