A couple of weeks ago I wrote about one aspect of the White House subprime rescue plan, which has to do with “freezing” the interest rates on certain adjustable rate mortgage at their current levels, allowing the homeowners more breathing room before their monthly payments rise. Why am I so interested in the White House’s plan? As an Indiana bankruptcy attorney, I sit up and take notice of any effort to help people get back on their feet financially, especially in light of the fact that Indiana ranks among the top ten states in number of foreclosures. As I counsel with my clients, anything that gives them more choices about how to handle their debts and their assets is positive, in my judgment.
In addition to the “freeze”, under the plan some borrowers will be allowed to transfer their loans to the government’s Federal Housing Administration. This will be made possible by relaxing some of the borrower qualification standards for FHA loans.
One of the underlying goals of the plan, under the supervision of Treasury Secretary Paulson, is to stop a large number of homes from entering foreclosure status. Since bankruptcy and foreclosure are so closely intertwined in many cases, the ability to avoid foreclosure (if keeping the home is a high priority for the clients) means more flexibility in planning an overall financial rebuilding strategy to fit each client situation. As Martha Stewart might say, “That’s a good thing.”