Your Home Mortgage and the Homeowner Affordability and Stability Plan
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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. Obama launched the plan in Arizona, a state that has been significantly affected by home mortgage defaults and foreclosures. The $75 billion plan aims to curtail the increasing number of foreclosures and keep responsible homeowners on top of their home mortgage payments. 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.
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. The problem for many homeowners in areas of the country hardest hit by decreasing values is that they now own less equity. 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. A homeowner with a mortgage loan not backed by those institutions might instead be able to modify the loan. Payments on mortgages will be reduced to about 30 percent of income for those who are qualified for such a modification. 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. Modifications will not be offered to those who clearly will not be able to afford a mortgage, regardless of adjustments. Those homeowners who have jumbo loans do not qualify for home mortgage adjustments under the current housing aid plan. Additionally, a home must be a primary residence to be eligible for loan modification, which means investment only properties will not qualify.
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More references on refinance mortgage, visit www.getsmart.com/refinance.
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