Lawmakers near deal on subprime mortgage alternatives

[loan_seeker]

By early April, both chambers of Congress are likely to tie the bow on a bill that would expand the reach of the Federal Housing Administration, which aims to provide safe loan alternatives to subprime mortgages and make homeownership more accessible.

The FHA program is intended for mortgage borrowers with weak credit or little or no cash who may not be able to otherwise get an affordable mortgage. Borrowers get FHA loans from a private lender just as they would any other mortgage.

But they pay a small premium to the FHA every month. The FHA, in turn, uses those premiums to cover the lender in the event of foreclosure and requires lenders to pursue viable ways to help borrowers avoid foreclosure if they become delinquent.

That gives borrowers a better chance of keeping their homes should they fall on hard times. If a lender does have to foreclose, the FHA will pay the lender the unpaid principal on the loan, forgone interest and a portion of the foreclosure costs.