Details of Home Mortgage Aid Plan
This week, the President and his team unveiled the stimulus program designed to boost the housing market. Obama launched the plan in Arizona, a state that has been significantly affected by home mortgage defaults and foreclosures. 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. Homeowners with mortgages insured by Fannie Mae and Freddie Mac will have an opportunity for refinancing. 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. The mortgage payment would maintain those modified terms for five years, then will slowly be raised again. To qualify for a home mortgage adjustment, banks will consider the amount of debt a consumer has relative to his income. In some cases, debt counseling will be required. Consumers who receive mortgage adjustments may also receive incentives for making their payments on time.
The government will give lenders monetary incentives for modified loans, as well as for those customers who keep their mortgages in good standing. Homeowners will have to prove that they have the income to support their modified loan payments. Those who appear unable to meet their loan obligations, even after a modification, will not qualify. Consumers that hold jumbo home mortgage loans will not be eligible for loan modifications. 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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