Homeowners upside down on their mortgage but not behind can now get relief. The Obama administration announcing a plan that included: new FHA backed loans for upside down homeowners, incentives to lenders who reduce the principal balances for homeowners who owe more than their home is worth and incentives to lenders who reduce payments for unemployed homeowners. The incentive portion of the program alone will take about 14 billion so there will be plenty of money for everyone in need.
Homeowners will be able to get new mortgage loans that exceeding the value of their homes
FHA backed mortgage loans will be offered to homeowners who need to refinance their loans to get a lower rate and payment but are upside down. FHA will receive 14 billion dollars in incentive money. The total cost for the entire adjustments to two specific plans are very well funded with up to a $50 billion allocation of the existing $75 billion foreclosure prevention program budget /Troubled Asset Relief Program (TARP).
FHA loans offered through the program can be up to 115% of the home’s value
Essentially these loans will exceed the value of the home but reduce the interest rate and payments substantially. Tax payers need not worry to much as the complete program will be funded from the existing Federal budget along with some private sector funds according to the Making Home Affordable press release on March 26, 2010.
There are essentially two programs that are being adjusted to help homeowners out
The first is adjustment is to the Home Affordable Modification Program (HAMP). The second is to the Federal Housing Administration (FHA) Program. The major pushes are: 1) offer FHA back loans for those who want to refinance but are upside down 2) reduce principal balances for home owners that are upside down by using government funded incentives paid to lenders (which will also reduce the mortgage payments) 3) offer payment reductions to unemployed borrowers using government funded incentives paid to lenders; and there is plenty of money.
The plan seeks to assist 3 million to 4 million homeowners
There are presently an estimated 4.5 million homeowners already in foreclosure or who have had a notice of default filed (being over 90 days late). Surprisingly out of 1.1 million people who have applied for the previous government program’s assistance only 170,000 have completed the process.
The major flaw in the program could be that it is offered to those who are not behind in their mortgage.
This may eliminate many potential applicants if this is not adjusted quickly. Many homeowners have stopped paying their mortgage to qualify for a modification and when denied give up. This program will not help them but there are other possible solutions including: short sale, bankruptcy and the uprising in legally assisted modifications.
A possible loop hole could be getting modified and then re applying when you are current to have your balance reduced.
The only real requirement seems to be the loan balance at present can’t exceed $729,750 per the MHA website. So if someone behind takes a payment restructuring and gets caught up they may be able to re apply and get their principle balanced reduced later. Only time will tell if this will work or not as guidelines and rulings surface.
Unemployed homeowners are offered reduced payments for 3 to 6 month
Under the Presidents plan the lenders of unemployed homeowners will be offered incentives to reduce or possibly eliminate the mortgage payments for the borrowers for a 3 – 6 month period to additionally help curb the large number of foreclosures due to unemployment. This comes at a critical time when so many are unemployed.
The average homeowner will save $500 per month with the program’s assistance.
If you have applied to modify your loan and only got a restructuring (the principal balance was not reduced) Apply again immediately. You should first contact your lender directly. If you get no assistance contact a certified agency for assistance.
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