The Housing and Economic Recovery Act of 2008

The Housing and Economic Recovery Act of 2008, (HERA,) which was reluctantly signed into law by the President, is anticipated by the U.S. of Housing and Urban Development (HUD) to be implemented on October 1, 2008. The law permits the Federal Housing Administration (FHA) to insure up to $300 billion in new loans...which is estimated to assist 400,000 households.

The statute applies only to mortgages originated on or before January 1, 2008. The law does not require the holder of an existing mortgage to participate in what is an entirely voluntary process. All existing mortgage holders - mortgage companies and/or servicing companies - must voluntarily consent to the refinancing of the existing loan that would have a thirty (30) year term with a fixed rate and would be FHA insured. To participate in the program, the mortgagee must consent to reduce the entire principal of the loan(s) to an amount that is 90% of the fair market value of the real estate.

The potential relief available under the HERA is but one of the options that both the borrower and counsel must consider in evaluating a course of action for those facing the possibility of a foreclosure for reason of a sub-prime mortgage or resulting from predatory lending practices.

The present foreclosure crisis is but a first wave, with a second inundation resulting from interest only mortgages maturing soon to follow. The development of a course of action to provide relief to the victims of these crises requires an experienced knowledge and understanding of the realistic remedies that are available. A misstep may result in the homeowner loosing his/her home when there were options available to prevent a foreclosure.


by: Eugene B. Berman, Esq.