For the mortgage refinance program, only homeowners whose loans are held by Fannie Mae or Freddie Mac are eligible; they have until June 2010 to apply. Consumers should contact their loan servicing company that sends out their monthly bill to find out if their mortgage liens are held by Fannie or Freddie. The two mortgage finance companies own or guarantee almost 31 million home mortgages more than half of all U.S. home mortgage loans.
Mortgage lenders can reduce a borrower’s interest rate to as low as 1% for 3 years, 2% for five years. Mortgage interest rates would then rise to about 5% until the mortgage is paid back. If the loan workout plan works as proposed, it could be a big plus for borrowers like Nick Kavalary, a network cable installer who lives outside Milwaukee. Kavalary, 42, has been struggling with JPMorgan Chase & Co. to get a loan modification. He was finally approved for one this year, but it only lowers his mortgage rate from 10.75%. to 9.8%. Even at the lower mortgage rate, he said, making the loan payment is nearly impossible. “If I can’t pick up a 2nd job, I’m going to lose this home,” he said. “With the job market being the way it is, nobody’s hiring anybody.”
Meanwhile, action to put in place another part of Obama’s housing plan is expected soon on Capitol Hill. A few days ago, the House Democrats agreed to narrow proposed legislation that gives bankruptcy judges the power to change the terms of mortgage loans for borrowers distressed with debt. The latest version of the mortgage relief bill would have the court’s judges considering whether a homeowner had been offered a reasonable loan by the bank to restructure his or her home loan before seeking help in bankruptcy court. Borrowers also would have a responsibility to document that they had previously attempted to renegotiate their home mortgage.
