New Mortgage Aid Plan Announced On Friday.
President Obama announced a major reworking of the troubled $75 billion plan to prevent foreclosures. The revamped plan is designed to help unemployed homeowners and those who owe more on their mortgage than their home is worth. Three to four million homeowners are targeted with the plan.
Borrowers will be able to get help in one of three ways:
1) unemployed homeowners can get a three-six month break on their mortgage payments,
2) banks will get financial incentives to reduce mortgage balances for underwater homeowners, or
3) lenders can offer refinanced loans backed by the FHA for those borrowers.
Help should be available in the coming months.
The piece for unemployed homeowners is designed to give them time to find a job. During that three-six month period, their mortgage payments will be no more than 31% of their monthly income. If a job is found during that time, the homeowner will be reevaluated for a loan modification. If a job is not found, they will be encouraged to enter into a short sale. The success of the program depends on the mortgage companies’ willingness to participate. To qualify, homeowners must have a mortgage of less than $729,750 and prove financial hardship. At least 31% of pre-tax income must be being spent on the mortgage.
