Editor's note: This is Part 2 of two parts. The first part appeared in this space in Thursday's edition of The Union, and also can be seen online TheUnion.com.
Congress recently passed the Helping Families Save Their Homes Act (S. 896), and President Barack Obama signed it into law last week.
In the last column, we looked at the first two provisions of the bill. Today, we'll look at the remaining three.
Insurance limit extended
The $250,000 FDIC insurance limit has been extended to Dec. 31, 2013.
The limit was set to expire at the end of 2009 and revert back to $100,000. The new law prevents another large-scale panic by extending the higher $250,000 limit for another four years.
Also, the FDIC is now allowed to borrow up to $100 billion from the U.S. Treasury in case of emergencies. This is significant because insured deposits have tripled since the FDIC's old borrowing limit of $30 billion was set during the 1990s.
The FDIC is funded by the banking system and has never been funded by the U.S. government. They only borrowed once from the Treasury during the 1990s and paid back all the money in full with interest.
As a temporary measure, the FDIC is allowed to borrow up to $500 billion from the U.S. Treasury through the end of 2009 " as long as this is approved by a two-thirds majority vote of the FDIC Board of Directors and the Fed Board of Governors, in consultation with the president and the U.S. Treasury Secretary.
Borrowers must be notified when ownership of their mortgage changes.
This is significant because previously, borrowers were only notified when their servicer changed. The current mortgage crisis has proven that the owners of the mortgage " not the servicers that collect the monthly payments " are the real decision makers when it comes to approving loan modifications and short sales.
Protection for tenants
Tenants have better protected in the event of their landlord's foreclosure.
Many renters have been forced to leave their homes because of their landlord going through foreclosure. The new law provides two minimum guidelines that protect tenants:
- Tenants are now allowed to occupy the property until the end of their lease term (even after the landlord goes through foreclosure), as long as the new buyer does not intend to occupy the new home as their own primary residence.
- If the new buyer intends to occupy the home as their own primary residence, the tenant must be given a 90-day notice before being forced to leave.
Home owners and buyers should work with a certified mortgage planning specialist, especially with all the rapid changes that are taking place in the mortgage and housing markets.
Jeff Kuns is the owner of Mortgage Advisors Group in Nevada City and co-author of the book, "Borrow Smart, Retire Rich." He can be reached at 478-1271 or www.thewealthsteps.com.