March 7, 2012 – The president yesterday said the administration will review every service member foreclosed upon since 2006 with an eye toward providing redress and that the Federal Housing Administration will also reduce its fees for borrowers refinancing loans it already insures.
The FHA fee reduction is part of the president’s plan, unveiled in the State of the Union address, to permit all home owners to refinance their homes through the FHA, whether or not their current mortgages are FHA-insured. The White House says 2 million-3 million borrowers could be eligible for the reduced fees under the streamlined refinancing program for those with FHA-backed loans.
Specifically, the FHA is reducing the up-front mortgage insurance premium from 1 percent to 0.01 percent for streamlined refinancings of loans originated before June 1, 2009. It is also cutting the annual fee for these refinancings in half, to 0.55 percent. The FHA estimates the typical FHA borrower could save about $1,000 a year.
The review of foreclosures on service members is in addition to the settlement the federal government and state attorneys general announced last month with the nation’s largest mortgage servicers over abusive practices. That settlement carried a price tag of $25 billion.
That settlement will apply in part to compensating service members who were wrongfully foreclosed upon according to rules of the Servicemembers Civil Relief Act. The review will be overseen by the Just Department’s civil rights division. Where the foreclosure violated the SCRA, the servicer will compensate the borrower for the greater of:
- the sum of lost equity, interest and an additional $116,785; or
- an amount provided for the same violation as a result of a review conducted by banking regulators.
The relief for service members may also include compensation for the lost value of a home where the homeowner was forced to sell at a loss due to a permanent change in station. The administration is also extending SCRA foreclosure protections to all service members, not just those whose loans were secured when they were not on active duty.
This settlement also provides for a contribution by servicers of an aggregate $10 million to the Veterans Housing Benefit Program Fund. For more, see the White House's fact sheet.