The US government has finally taken the reins to solve the rising number of foreclosure properties. The government said that it will try to help the housing industry by restructuring hundreds of the thousands mortgages in the country.
Unveiling of the Proposed Plan
The plan, which was announced on Tuesday, stated that Fannie Mae and Freddie Mac will alter the terms of their overdue mortgages. The alteration will require borrowers to use 38% of their income for mortgage payments. The government believes that such a program will help US citizens avoid foreclosures.
Under the proposed plan, the alteration will also involve extending mortgage maturities to a maximum of 40 years. Offering of lower interest rates and canceling principal payments are also being considered.
In a statement, Federal Housing Finance Agency Director James Lockhart said that foreclosures have gravely affected lots of families. He also said that the increasing number of foreclosure homes has also put its mark on the housing market. FHFA believes that it is time for the government to put a stop to the problem.
Details of the Proposed Mortgage Modifications
The initial plans have delineated the borrowers who can benefit from the assistance. Borrowers who live on the mortgaged properties and have a loan value of at least 90% will be made eligible for the alteration of terms.
Borrowers who are nearing foreclosures must contact their lenders or servicer to check if they qualify for the alteration. They must also be willing to rework their mortgages.
Under the said program, the qualified borrowers will be tasked to solely shoulder the principal amount they have borrowed. They will also be provided with the option to defer part of the payment for the principal amount.
To encourage the participation of mortgage services, the government proposes to pay them a fee of $800 for modified mortgages.
Leticia Carvalho has been educated in the finer points of the foreclosure market over 5 years.