First, it offers $200 billion to provide refinancing for some homeowners who owe more than their homes are now worth-shorthanded as being “underwater” on their mortgages. To qualify, these homeowners-5 million of them by administration estimates-must have their mortgages in the hands of Fannie Mae or Freddie Mac, the mortgage finance giants that the government seized last September.
Many of these homeowners would like to take advantage of today’s historically low interest rates and refinance but can’t, since the law prohibits refinancing if the current mortgages reflects less than 80% of the homes’ values. These homeowners now can seek to refinance if their mortgages are up to 5% higher than the present-day values of their homes.
The other pillar of Obama’s plan attacks the problem of affordability.
The administration provides another $75 billion in incentives to help prevent foreclosures in cases in which the homeowners, up to 4 million of them, are about to lose their homes. The money comes from the $700 billion bailout fund approved last October.
In exchange for the incentives, a servicer would modify a mortgage so that no more than 38% of a homeowner’s monthly after-tax income was taken by the monthly mortgage payment. The government then would step in and share the cost of reworking that mortgage so that no more than 31% of the borrower’s monthly income was tied up in the payment.
For more information – including how to tell if you qualify for help – check out the original RIS Media article.
Submitted by exclusive home buyer agent Mary Rugani