Posted by Admin | Posted in Articles | Posted on 27-07-2010
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. Helping homeowners with home mortgage refinancing opportunities and encouraging lending institutions to adjust existing mortgages are two objectives already set forth.
President Obama has repeatedly stated that the purpose of any plan would be to help responsible homeowners stay in their homes. 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. Lenders now require at least 20 percent equity to be eligible to refinance a home mortgage. But many homeowners have been affected by drops in home values, which have left them holding less equity in their homes.
With the housing plan, Fannie Mae and Freddie Mac mortgage holders can refinance with equity levels below what many banks currently require. A homeowner with a mortgage loan not backed by those institutions might instead be able to modify the loan. For consumers who qualify, monthly mortgage payments will be decreased to 31 percent of gross income.
The mortgage payment would maintain those modified terms for five years, then will slowly be raised again. Lenders will look at the debt to income ratio of customers to determine who is eligible for a home mortgage loan modification. In many instances, sessions with a financial counselor will be mandatory. Banks may also give rewards to those who continue to pay their mortgage bills on time after a loan modification. The government will give lenders monetary incentives for modified loans, as well as for those customers who keep their mortgages in good standing.
There will need to be proof that consumers will realistically be able to make their payments if their mortgages are adjusted. Modifications will not be offered to those who clearly will not be able to afford a mortgage, regardless of adjustments. Consumers that hold jumbo home mortgage loans will not be eligible for loan modifications. 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.