Let’s read and evaluate the info on which borrowers get mortgage relief and which homeowners are being hung out for foreclosure. Learn more about what mortgage lenders will be encouraged to participate. Clearly the Obama administration has incentives to mortgage lenders who cooperate with the Government initiative that request lending companies extend loan modification plans to struggling homeowners.
Watch Obama Home Mortgage Relief Video
One of the early surprises was the scope of the mortgage refinancing plan. In case you haven’t been paying attention, this part of the program is aimed at responsible homeowners who would like to refinance to today’s low interest rates but are prevented from doing so due to falling home values.
We had originally been told that only “conforming” loans would qualify for this departure from conventional “loan to value” guidelines. In other words, the benefit would only be available to borrowers whose loan balance was less than the Fannie Mae maximum loan amount of $417,000.
See that the details of the plan enabling FHA home refinancing up to a current balance of $729,750. This part of the plan makes good sense, and here’s why:
> The foreclosure prevention plan is only available to borrowers submitting owner-occupied properties who are not late on their existing mortgage payments. Statistically speaking, this group of homeowners is less likely to default on their home loans.
> The refinance and modification program is only available for home loans which are owned or guaranteed by Fannie Mae or Freddie Mac. Since the government is already on the hook for these loans, it makes sense to make them affordable, in an effort to stem the foreclosure crisis.
> Borrowers must be able to qualify for the terms of the new, lower rate home mortgages and prove enough income so that the new loan is affordable and sustainable. Unlike the modification plan, this refinancing is not temporary.
> Under a typical refinancing, the maximum loan is 80% of the home’s current appraised value. That has been the sticking point for many of these borrowers. But under this program, the loan can go as high as 105% of the appraised value of the home. This change is critical to the mortgage relief program. It reflects the realization that dropping home values in a neighborhood don’t make a borrower less likely to pay on time. Read the complete article >
