New FHA Plan for Underwater Owners

The latest government program to help underwater borrowers debuted Tuesday.

Under the plan, the Federal Housing Administration permits lenders to choose which borrowers will participate from among their clientele. The idea is that there are some borrowers banks and investors want to get rid of because they are likely to default anyway.

To qualify, borrowers must be current on their mortgages and owe at least 15 percent more than their home’s current value. Lenders must agree to forgive at least 10 percent of the debt.

The government estimates that between 500,000 and 1.5 million borrowers will be helped, but analysts at Barclays Capital say they doubt whether the program will reach 300,000 borrowers.

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Source: Associated Press, Alan Zibel (09/07/2010) – article posted on Realtormag.com