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Project Lifeline Can Help Preserve Precious FHA Loans

Richard Barrington
LoanBiz Columnist

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Project Lifeline, a new program to help distressed mortgage borrowers, may be especially important to home owners who are struggling to make payments on FHA loans. Those FHA loans are especially important for creating home ownership opportunities for people who might not otherwise qualify for a mortgage. Project Lifeline may be the best hope for some home owners to hang onto their FHA mortgages. Project Lifeline creates a window of opportunity that requires action by home owners who are facing foreclosure. Those who simply fall behind on their mortgage payments and slip into foreclosure will not receive any special consideration.

Role of the Federal Housing Administration

FHA Loans are backed by the Federal Housing Administration. The role of the Federal Housing Administration is not to make loans. Instead, the Federal Housing Administration acts as an insurer of loans. The loans themselves are made by independent lenders.

The Federal Housing Administration insurance gives lenders confidence in making loans to people with minimal savings and brief credit histories. Such people might otherwise have trouble qualifying for a mortgage. Notably, the Federal Housing Administration is not intended to make mortgages available to people with bad credit histories. In other words, FHA loans can give opportunities to new borrowers or those with modest means; however, they are not intended to continue to give opportunities to people who have not met their loan obligations in the past.

Naturally, a default would do great damage to a borrower's credit history, making it much more difficult to qualify for an FHA loan in the future. For this reason, borrowers would be wise to take every step possible to hang onto their FHA loans.

Project Lifeline

Project Lifeline is a program that was worked out recently between the Federal government and six major mortgage lenders. It gives distressed borrowers an extra thirty days to work out solutions with their loan servicers before foreclosure.

Since FHA loan borrowers would be unlikely to qualify for other types of mortgages -- especially if they get a default on their records -- it is especially important for them to take advantage of the Project Lifeline grace period to work out any problems with their lenders. Those lenders, in turn, should be eager to work with their borrowers -- as long as a fair and realistic repayment program can be arranged, lenders would rather make a few concessions than foreclose on a property.

Preserving FHA Loans

FHA loans encourage lenders to take a chance on borrowers who otherwise would not have the savings or credit history to get a mortgage. Because of this, FHA loans often represent the best shot at home ownership for many borrowers. Giving up that shot by defaulting would represent a missed opportunity that may never repeat itself. Using Project Lifeline to preserve an FHA loan may be an action that has a lifetime of benefits.

Source:
Federal Housing Administration


About the Author
Richard Barrington is a freelance writer and novelist who previously spent over twenty years as an investment industry executive.

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