Housing Bailout

Housing BailoutPresident Obama announced a housing rescue plan that might help as much as nine millions homeowners.

The cost of the plan could be as much as $275 million dollars. There are three different components to the housing bailout plan.

First component:

The first component will help home owners that are currently making mortgage payments ontime, want to refinance to a lower rate but can't refinance because they do not have enough equity in their homes. The plan will change the current restriction on Fannie Mae and Freddie Mac to allow the government-sponsored enterprises (GSE) to refinance mortgages valued at more then 80% of the home's value.

Who qualifies?

Your mortgage debt has to be between 80% to 105% of your home's value and your loan has to be guaranteed by either Freddie Mac or FannieMae. Your lender can tell you if your mortgage is guaranteed by Fannie Mae or Freddie Mac.

Second component:

The second component will provide incentives to lenders to alter the terms of  mortgage loans to make them more affordable for borrowers who are in trouble.   The government will pay lenders $1,000 up front if they reduce a borrower's monthly payments to less then 39% of the borrower's income. The government will further reduce the payment to only 31% of a borrower's income by using funds from a new $75 billion program.

Who qualifies?

Anyone who lives in a home they own (can be a single family, 2-unit, 3-unit or 4-unit home) and is underwater, meaning the owe more then the home is worth.  You must live in a single family home or multi family home to qualify. Your lender must also be willing to reduce the monthly payments.

Third component:

Increase the credit available for mortgages by providing an additional $200 billion for Freddie Mac and Fannie Mae to buy mortgage backed securities which nobody else wants to buy these days.

Unfortunately the plan doesn't help everyone, particuarlly if you owe more then 105% of the value of your home.  Overall the plan will help the housing market recover.

//thepennydaily.blogspot.com

 
Author: Jason P. Jones
February 19th, 2009