As I had written about previously, President Obama is trying to do whatever he can to keep homeowners in their homes. He’s unveiled a new plan to prevent and lower the amount of foreclosures across the country. The new plan requires lenders to reduce the mortgage payments for their unemployed borrowers for three to six months. For those having trouble paying but aren’t unemployed, he’s trying to encourage the same lenders to reduce principal payments if you pay your loan on time each month and are current and stay current.
By beginning this plan, if it could prevent a whole bunch of foreclosures at once, it could delay the dramatic decrease in prices and help to stabilize the housing market a little bit. This way the lower prices will hit over time. Some in opposition to this plan use that to say this will just delay the inevitable, that these homes will still go into foreclosure, it’ll just take longer.
But it is a benefit to those who lose their job and don’t want to lose their home. To qualify, you need to live in the home, have a mortgage of less than $729,750, and receive unemployment benefits. They’ll have to spend no more than 31% of their monthly income on their mortgage. This plan will be available over the coming months.
What if you owe more than what your house is worth? For many, this is when they list the house as a short sale. Meaning, the lender will agree to sell the house for less than is currently owed on the mortgage. Obama is trying to help people in this situation keep their homes. It’s possible they can refinance with FHA-backed loans.
In order to qualify for one of these, you need to have a mortgage payment of $729,750 or less, show that you’re in financial trouble, and spend at least 31% of your pretax income on your monthly mortgage payment. Lenders then can reduce the mortgage payment by about 10%. You can’t be in default at all. You must be current on all of your payments to qualify. However, this plan is a completely voluntary one. The lenders do not have to agree to do this.
Do you think that this is a good idea or that it will just delay the inevitable? I’d love to hear your thoughts. Please leave me a comment below or visit me online. More information on the program can be found here.