As many of you might have already heard President Obama has just came out with a new mortgage rescue package which is fixing to be unveiled to the public on March 4, 2009. The goal in this rescue plan is designed to help many homeowners in this mortgage turmoil that has gripped the whole country. Some of the most troubled mortgage areas has been the areas that have traditionally gone up and down very quickly in their home values. Those troubled areas have been primarily Florida, California, Arizona, Michigan, Nevada. All the other states have been feeling some of the effects too. Millions have lost their homes to foreclosure, and the numbers continue to rise at an alarming rate. Many homeowners believe that their is no real help out there for them after they have been turned down time and time again by their lenders to have their loans modified to a new low fixed rate mortgage payment.
With the former administration, several mortgage rescue plans came out under President Bush's administration. However, the problem mortgages continued to rise. They were hoping the mortgage crisis would bottom out, but we have yet to see a bottom in the housing market with it's ripple affect in just about all industries. The problem with the mortgage bailout under the prior administration is that allot of homeowners were excluded out of that plan. The plan was set to modify homes of individuals who might have been able to qualify for a refinance, but many opted for a loan modification instead. There were provisions in the plan for Fannie Mae and Freddie Mac, HUD Loans, and of course many mortgage companies had provisions set for individual in extremely unusual circumstances. Many homeowners still did not qualify. For example, if a homeowner had too many bill and was always late on their payments, or if the homeowner did not have a HUD, Fannie Mae or Freddie Mac home loan or loan securitized by one of the above then they did not qualify. Unless they had privy information that some individuals in the mortgage industry might not even have, then they stood no real chance of getting a new lower loan payment.
The new plan that is still been worked out by President Obama is expected to take this mortgage rescue plan to the next level. It is believed to be the plan that will allow the market to bottom out which will stable the housing market, in turn which stabilize our economy ,start creating new jobs and boost our economy. Some of the details that have came out to just a select few, but not with all of the details yet; it's still sketchy. An overview of the plan with the remaining details are expected to coming out on March 4TH, 2009. Mortgage companies and homeowners alike are eagerly anticipating it's arrival.
Under the new homeowner affordability and stability plan, eligible borrower who are on time with their payments, but have been unable to refinance due to their home value eroding, may now have an opportunity to refinance into a new 15 or 30 year fixed rate mortgage loan. Fannie Mae and Freddie Mac will be allowing refinancing of loans that they hold or that are have been mortgage backed securities.
If you owe more than your property is worth, eligible loans will now include loan where the 1St loan will not exceed 105% of the current market value of the home. Lets say you owe $315,000 on your loan but your house is worth at least $300,000 then you may qualify for refinance. The details will be announced March 4Th, 2009. Some of the requirements will include having enough income to make your new payments and having a decent payment history. This loans are limited to Fannie Mae and Freddie Mac backed loans.
A buyer with 2 loans, a first and a second lien may qualify if the amount due on the first mortgage is no more than 105% of the property value with the new homeowner affordability and stability plan. Your eligibility will be based on if the 2ND lien holder is willing to stay in 2ND place and assuming that you meet the eligibility requirements for the 1St loan.
The goal of the plan is to help credit worthy borrowers who have been committed to paying their mortgages with affordable payments for the rest of their loan. Individuals with high interest, or if they had a teaser rate that will now be increasing might see a big difference in their house payment if they were to refinance. For those submitting a loan application, they will get a "Good Faith Estimate" which will include their new mortgage payment amount, the interest rate, and the total payment over the life of the loan. That homeowner can now use that "Good Faith Estimate" to compare it with what they are paying now and if it makes sense they can go with that option or stick with their original mortgage.
The object of the new plan to provide help with an affordable fixed rate mortgage. Every loan refinanced under the plan will have either a 15 or 30 year mortgage option with a fixed rate interest. Which ends up giving the borrower tremendous savings over the life of the loan. This plan will not reduce the total amount owed on the loan.
To find out if your loan is owned or if it have been securitized by Fannie Mae or Freddie Mac just contact your lender after March 4, 2009. Lender will start accepting application after details are handed out on March 4. So anytime after March 4, 2009 is "fair game" to start checking with your lender. Lenders will see tremendous increase in their call volumes and become very busy answering question. Many lenders might forgo many of their normal daily activities to accommodate the new calls they are going to be receiving after the announcement is given.
While anxious home owners are waiting they should get together their personal information that their lenders will need for after March 4, when the new program is rolled out. They will need at least
1. Their most recent income tax return.
2. Borrowers and co-borrowers monthly income.
3. Detailed information about any second mortgage on the house.
4. All payments on credit cards that they have and the balances.
5. Other loan payment obligations.
If your are at risk of foreclosure you might have questions too. To try to prevent more foreclosures the treasury plans to give out financial incentives to lenders to modify those existing loans on 1St liens that are delinquent in their payments, and for those at risk for foreclosure. They hope to intercept or prevent up to 4 million 1St liens that are at risk.
If you are on time with you mortgage payments you can still qualify for a loan modification. If you are struggling, loss some or all of your income, or you are on an Adjustable Rate Mortgage(ARM) that is fixing to adjust. Regardless, don't just give up. You might still qualify and actually get a modification. Allot of times if you live on the property as the primary resident, your mortgage payment is above 31% of your monthly gross income, and your loan is not more than 105% above your home's current market value then you stand a good chance of getting a lower payment. Your mortgage lender or servicer will make the final decision based on if they think you have the financial ability to pay the loan back at the new lower rate.
Lets say the property you financed is a now a rental property, or a vacation home then you will not be eligible for reduction in the payments. If you use to live on the property but have moved out of the property then you would not qualify either. This is for primary residence only.
On the other hand, if you live in a duplex and you rent out the other 3 units, then you would qualify for help under this new plan. If you live in at least 1 of the units is what it takes to qualify.
If you have 2 mortgages, a 1St and a 2ND loan, only the 1St loan qualifies under this plan. If you have 2, and they are both 1St liens; then both your loans qualifies. Or if you have 3 loans: 2 being 1St and 1 being a 2ND lien; only the 2 1St liens would qualify.
Even thought the plan is designed to lower payment on the loan by reducing the interest rate, some lenders will consider lowering your total principal balance also. That will be at your lender's discretion.
To encourage borrowers to work maintain ownership of the property, the plan will give incentive payments as a borrower make they modified payments on time. This reduction will accrue on a monthly basis and will be applied directly to the mortgage principal balance making it lower as time goes along. An on time paying homeowner that has been modified can have up to $5,000 applied directly to their principal balance by the end of 5 years, just for paying on time.
Mortgage lenders are not required to participate in this new program, they do it on a voluntary basis and all loans will be modified on a case by case basis. In fact many lenders are putting off foreclosure for some of their loans that they think might qualify for a loan modification. Remember, there are financial benefits for both the lender and borrower to make this worthwhile.
If you are a homeowner you will probably get some information from your lender that will make you aware of the new program now available to borrowers.
Many critics believe that this plan will not do much more than what the prior plan did, which was like "putting a band aid on a sore." Some critics believe we need a comprehensive plan that will give home owners more credits when the buy a new home to encourage spending to build back consumer confidence once again. That way consumers will start spending again, and the new money circulation in the economy will create more new jobs for many. Therefore, lifting our economy to the level we all enjoyed recently.Economist statistics show that when a million new houses are not built there is a 89.7 billion in government revenue lost, because state and local government profit a great deal from all the building activities. In 2005, 1.7 million houses were built, and compare that to 2005 where a bit under 500,000 new houses were built in the United States. So from those numbers alone, they is huge decline in new houses built since 2005. That represent huge jobs losses and loss revenues. The housing market has lead this country into and out of recession since world war II, except for the recession of 2002; So housing is the driving force in our market in helping our economy to recover and to start seeing real changes. When we built new homes we can create new jobs; that will churn our economy and get us moving in the right direction again.Which will build consumer confidence and foster consumer spending. In fact, a few experts on different housing panels believe now is the time to buy a new home when the prices are low and so is interest rate. This kind of condition is the "perfect storm," buy at an all time low as far as the house prices and interests are. That way once the market bottoms out, and starts to turn around you would have gotten in at a great price and with an unbelievable interest rate. Back in 2006 and 2007 when a large number of people bought homes, that was the wrong time, considering what happened right after that. If you wait too long and start to sense that we have already bottomed out, then it might be too late at that point. Interest might start to climb once again, and the now low house prices might start rising also. Think about it for a minute.
For the latest on the mortgage bailout to help homeowners go to http://hstrial-oswingrant.homestead.com/RecentHousingDevelopments.html
