Obamas New Plan To Help People With Their Home Loans
With all the foreclosures on the market today
, many homeowners have been looking for help with their mortgage loans without much help over the last few months. The Obama administration has released a $75 billion plan to refinance and modify loans for those that need the help to stay in their homes. This does not mean that every American can ask for help and receive it, there are strict guidelines, but it should stop the downhill slide of more foreclosures and bring an upturn in the economy especially where home loans are considered. The money that is being used for this loan modification program is actually coming from the $700 billion Tarp I that was approved in late 2008 under the Bush Administration.The modification loan will be backed by Freddie Mac and Fannie Mae and will provide the homeowner with the ability to refinance their homes with little or no equity. In some cases, homeowners can now receive a loan for up to 105 percent of the homes market value.
In order to receive the loan modification loan, you must show that you are having a hard time paying your mortgage payment due to a decrease in the value of your home or a hardship such as lost employment. The plan is to help families stay in their home and therefore will not be given if the home loan is not for a primary residence.
The plan is designed to reduce a persons mortgage payment to not over 38 percent of their gross monthly income. The government will help reduce the payment but only to 31 percent of their monthly income. First, the payment will be reduced by lower the interest rate. If this does not lower the payment to within 31 percent then the loan will be extended up to 40 years. If that still does not lower the payment to within 31 percent of the familys gross income, the next step would be that the servicer or loan provider would forebear loan principal at no interest.
Along with providing homeowners help to keep them in their homes, there are also cash incentives for the banks and mortgage holders. Servicers will be paid $1,000 for each modification and will get an additional $1,000 payout each year for as many as three years, as long as the borrower continues making payments.
Homeowners with a principal balance of no more than $729,750 are eligible as long as the home is the primary residence. In the majority of cases, the plan will aid those that have a hardship case, which is the main reason they cannot make their mortgage payments.
In order to learn if you qualify for a modification loan, you can speak with your lender or talk with a representative at Fannie Mae or Freddie Mac. Instead of losing your home, learn if you can modify your loan so you can afford to pay your mortgage. With a modification, you will not be reapplying for a new loan only changing the one you now have.
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