The Federal Government swooped in last weekend to seize the beleaguered mortgage giants Fannie Mae and Freddie Mac, empowered by a law Congress passed in July. One immediate result: mortgage rates dropped by half a percentage point in just a few days. But other provisions of the nearly 700-page law that goes into effect Oct. 1 are likely to be even more important to homeowners, potential homeowners and potential former homeowners — those whose mortgages now exceed their current means. That’s when the government will begin releasing billions of dollars for a range of programs meant to assist people with mortgages they can’t afford, help communities reverse the negative effects of foreclosure, and encourage house hunters to jump in and get some of that excess inventory off the market.
Officials at HUD, Treasury, the FDIC and the Federal Reserve are working feverishly to sort out the fine print of a program that will let the Federal Housing Administration (FHA) insure up to $300 billion of new, fixed-rate mortgages for homeowners who owe more than their house is worth and can’t afford their current loan. There’s a lot to sort out, considering that a key part of the program is convincing lenders to take a haircut…
