Government Announces Loan Modification & Foreclosure Prevention Plan
On Tuesday, the Bush Administration laid out a plan to rescue struggling homeowners and put an end to the crippling housing market.
The plan is based around the mortgages held by now government-run Fannie Mae and Freddie Mac. The details of the plan are as follows:
What homeowners are eligible? This plan, like many others, is only available for mortgages on homes in which the owner lives in. Even further restricting, the homeowner must be at least 90 days late on their mortgage and owe more than 90% of their home’s value. The homeowner must also certify the hardship which has caused the late payment of their mortgage and did not default on purpose.How will new loan work? Eligible homeowner will be refinanced into a loan in which their new payment is no more than 38% of their gross income, a common guideline for other government loan programs. There are no specific terms associated with the plan, it is largely up to the servicer of the current loan. According to the statement made Tuesday, “Once the affordable payment is determined, there are several steps the servicer can take to create that payment – extending the term, reducing the interest rate, and forbearing interest. In the event that the affordable payment is still beyond the borrower’s means, the borrower’s situation will be reviewed on a case-by-case basis using a cash flow budget.”
The few details given have already raised many questions. For instance, why must a homeowner be 3 months late in order to qualify? Obviously, the point of this plan is to cover the borrowers at most risk, but it leaves many people wondering if there will ever be a solution that helps people with loans that will re-set in the near future and/or have not missed a payment yet, but may be in jeopardy of doing so soon.
It’s also still largely up to the investors of the eligible loans whether or not they participate. With no terms in place, there is little incentive for an investor to get involved.
For homeowners who think they may be eligible, the starting point is still to contact you’re the company who services your current loan to begin negotiating a loan modification. It’s expected that participating servicers and investors could begin to offer modifications to eligible borrowers around December 15.
If and when this plan is set into use, check back here with Quicken Loans Mortgage News for updates. For another solution to the housing crisis, we encourage you to check out www.ASolutionThatWorks.com.
feeds.quickenloans.com
Comments
Tell me what you're thinking...
and oh, if you want a pic to show with your comment, go get a gravatar!