Housing Aid Plan and Your Home Mortgage
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by: marciafreeman
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President Obama announced the details of the long awaited plan to help the housing sector yesterday. He introduced the Homeowner Affordability and Stability Plan in Mesa, Arizona, one of the areas in the country with the highest home mortgage foreclosure rates. The goal of the plan is to help dependable consumers make their home mortgage bills and stem foreclosure rates. The two main tenets of the plan are to offer more homeowners an opportunity to refinance with lower interest rates and give home mortgage lenders incentives to modify current loans.
The President has made it clear that he wants to help those people who pay their bills keep their mortgages and property. In that spirit, the Homeowner Affordability and Stability Plan will allow a consumer who has a loan backed by Freddie Mac and Fannie Mae to refinance to a lower interest rate. To qualify for a home mortgage refinancing, most banks now call for 20 or more percent in equity. But many homeowners have been affected by drops in home values, which have left them holding less equity in their homes. The housing aid plan will allow Freddie and Fannie customers to refinance, in spite of having less than the required 20 percent equity in the home. For those customers who do not have a loan backed by Freddie and Fannie, mortgage loan modification may be an option. For consumers who qualify, monthly mortgage payments will be decreased to 31 percent of gross income. Those payments will stay at that level for 5 years, at which point they will begin to increase. Lenders will look at the debt to income ratio of customers to determine who is eligible for a home mortgage loan modification. In some cases, debt counseling will be required. Banks may also give rewards to those who continue to pay their mortgage bills on time after a loan modification.
To encourage lenders to offer mortgage modifications, the government will provide them with $1000 for every loan modification and additional funds when customers stay current on their loans. There will need to be proof that consumers will realistically be able to make their payments if their mortgages are adjusted. Those who appear unable to meet their loan obligations, even after a modification, will not qualify. Those homeowners who have jumbo loans do not qualify for home mortgage adjustments under the current housing aid plan. And it must be proven that any home is occupied by the owner, which means that those who bought property for investment purposes only will not be eligible.
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