Helping Families Save Their Homes Act of 2009

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Last month in May of 2009 President Obama signed into law the “Helping Families Save Their Homes Act of 2009”. Not a moment too soon for troubled borrowers facing foreclosure. This new Act allows home owners to save themselves from falling into foreclosure, protects renter’s rights, and encourages lenders to pursue other avenues of resolution.

This new act expands the eligibility for Bankruptcy – Chapter 13. It allows for the exclusion of mortgage debt from the debt limitations. This does not mean that you can walk away clean from the mortgage obligation however. This new Act allows bankruptcy judges to alter the mortgage terms for an individual filing for bankruptcy in one of two ways:

1. The judge can reduce the interest rate on the mortgage loan that the borrower has taken.

2. The judge can even extend the term of the mortgage loan for up to 40 years so that the monthly payment can be reduced as well.

For those properties that are FHA financed this new Act empowers the Secretary of the Housing and Urban Development (HUD) to pay off all or some of the balance owed on any FHA insured loans that are re-modified under this new Act.

As far as lenders and banks are concerned, the government realizes that by enforcing these institutions to take these measures that they might lose money. So in order to counter act this negative loss and stabilize all markets – the Act provides a “safe harbor” from the liability they may incur. Additionally, in some cases lenders and banks may receive a $1,000.00 for every loan that is successfully re-modified.

As far as renters are concerned – the new Act provides security for renters whose landlords fall into foreclosure. There are two forms of protection a renter may fall into:

1. If the renter has a lease, the new owner must honor that lease and allow them to fulfill the lease till it is set to expire given that payments are up to date and remain in good standing.

2. Secondly, if a renter is renting month-to-month without a long term lease they must be given 90 days (3months!) notice to leave the property.

There are however a few details and qualifications. For instance there MUST be a written contract to rent or lease the property, and the rent amount must not be substantially less than the current fair market value in the area.

Finally under this new act, the FDIC has raised the insured amount on bank deposits. Traditionally $100,000 – the new amount to be insured by the FDIC has increased to $250,000. This should bring more security into the banking industry and promote more people to trust the banks again and keep their money with them. This new increase is due to expire December 31, 2009 – and will revert to $100K thereafter.