Now that President Barack Obama’s $787 Billion Economic Stimulus Bill has been signed into law and will take effect on March 4, many American homeowners are anxiously wondering how this bill may affect the housing market and possible mortgage relief. Despite primarily focusing on bolstering the economy by creating jobs and reviving spending, the bill includes steps to revitalize this critically important segment of the American economy. But what impact will the stimulus package directly have on your mortgage?
President Obama’s financial resue plan, named the American Recovery and Reinvestment Act, is designed to address two groups of homeowners: those who are current on payments but have high mortgage rates and not enough equity to qualify for a mortgage refinance loan, and those who are at risk of losing their homes to foreclosure.
Watch Obama’s Radio Address 01-31-09
The mortgage rescue plan also intends to provide $200 billion in additional financial backing to Fannie Mae and Freddie Mac to increase money available for home lending.These steps will directly help homeowners and new home buyers seeking a new mortgage, says Michael Isaacs, president and CEO of Residential Finance Corporation a national mortgage lender specializing in FHA refinances. “The stimulus package aims to make money more readily available for lenders to help those who are currently in need,” says Isaacs. “The American Recovery and Reinvestment Act will directly help those seeking to refinance out of bad mortgages as well as those looking to become homeowners for the first time.”
Diana Golobay wrote an article recently about wo-thirds of homeowners surveyed in September said they met criteria for a mortgage refinancing program available through the expanded FHA mortgage offerings available under the newly-enacted Hope for Homeowners program, according to a media statement issued Monday by the Consumer Credit Counseling Service of Greater Atlanta.
Homeowners at risk of foreclosure or home loan default who called CCCS of Greater Atlanta for foreclosure prevention counseling in July and August were polled by e-mail regarding the requirements. Of the 591 homeowners polled, 381 – or 64.6 % – indicated through their responses that they were eligible to refinance their current mortgage loans into new fixed-rate mortgage insured by the Federal Housing Administration, according to the CCCS of Greater Atlanta statement.
The Housing and Economic Recovery Act of 2008, which became law in July and took effect Oct. 1, created a mortgage refinancing program intended keep homeowners from foreclosure. To qualify, borrowers must indicate they residence in the at-risk home, their mortgage originated before January 2008 and have no existing home equity lines or other second mortgages. Candidates also needed to indicate they do not own another home and they spend 31 % of their gross monthly income on mortgage debt.
“Our survey results indicate this new FHA loan program holds the potential to help a large number of U.S. citizens struggling to pay their mortgage,” said CCCS of Greater Atlanta president Suzanne Boas in the press statement. “Not everyone will be able to meet the terms. But if someone meets the basic criteria laid out in the housing bill, it would be worth a phone call to their lender to ask about the FHA refinance program.”For the 35% of homeowners polled who indicated multiple loans or second mortgages on the at-risk property, eligibility for the refinance program must wait until all 2nd mortgages or home equity loans are paid off.“Loan modifications could be difficult if the 1st and 2nd mortgage are held by different lenders because only the primary mortgage qualifies for the FHA program,” CCCS of Greater Atlanta said.
