Last Friday, the Senate acted to fight the mortgage dilemma by making it easier for homeowners with high interest rates to refinance with loans that are federally insured. This move was approved 93-1 and permits the FHA to back refinance loans for borrowers delinquent on payments, due to rates raising from their initial teaser levels. Teaser refers to loans made with initially very low rates, which then skyrocket upward, almost trapping the borrower into impossible debt. Around 2 to 2.5 million mortgages are marked to have a rate increase next year. In order to further prevent another surge of foreclosure/faulty payments, the White House previously made an agreement with mortgage companies to halt certain interest rates for various sub prime mortgages over a 5 year period.

The bill passed by Senate also allows the FHA to accept lower payment plans, and to allow for more counseling eligibility for those who have problems making their mortgages. This change is very important, as it is getting harder and harder for people to refinance or get initial financing; private lenders are too scared to lend and government loans have been difficult to obtain, which hopefully this act will counteract. It has been estimated by the Congressional Budget Office, that this should boost an increase of 8% in FHA loans, or over $4 billion annually during the upcoming 5 years. 

Some of the specific areas where the FHA will be allowed to raise mortgage amounts given are in California and the more North East part of the U.S., to around $360-$147,000. FHA down payments would also be lowered from a required 3% to 1.5, depending on the circumstances of the loan, etc.