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Government Offers Two Solutions to Prevent Foreclosures



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By : John Cutts    99 or more times read
The Obama administration unveiled last Wednesday its rescue plan for the ailing housing industry in the US. It aims to help around 9 million Americans to get a chance of keeping their homes and prevent foreclosures. Called the Homeowner Affordability and Stability Plan, this program includes $75 billion which will be distributed to different subprograms.

Basically, the plan has two solutions:

  1. More refinancing opportunities for homeowners facing threats of foreclosures. This is expected to happen as the government pushes for lower interest rates.

  2. Incentives to banks, servicers and lending institutions. The government will give incentives to banks and other lending institutions if they take actions in helping their borrowers, such as mortgage restructuring to more affordable rates.

If you are one homeowner seeking to get help out of this plan, you have to know how you can get the most out of it. Here are things you need to know about the rescue plan.

  • For those seeking opportunities to refinance

    • The programís guidelines include provisions for homeowners who have debts that are higher by five percent than the current value of their homes. To qualify, your loan should be Freddie Mac or Fannie Mae-backed.

    • Those whose properties have values have decreased severely are not eligible.

    • Those who have very large mortgages are also not qualified. There are only mortgages that are eligible to qualify for the program. You can check with your bank what type of mortgage you have and if you qualify for the program. To have a reference, those considered as "jumbo" mortgages are loans above $417,000.

    • You have to be ready with proofs that you will be able to pay your mortgage. It is important to start on this so that you can prevent having a foreclosed home.

  • For those seeking to have their mortgage restructured

    • Homeowners who are at risk or in default can qualify for the program. The loan modifications would basically restructure the loans so that foreclosures
    • Homeowners who have higher mortgages than their income are qualified for the program.

    • Homeowners who face the risk of having a foreclosed property because of other outstanding loans such as car loans or credit card balances are qualified for the program.

    • Qualified homeowners will have their mortgages adjusted to required payment not higher than 31 percent of their monthly income.

    • The adjusted loans will go back to their original rates after five years.

    • Borrowers who pay on time will receive incentives of around $1,000 a year.

The rescue plan is not applicable to speculators and irresponsible homeowners. President Barack Obama was clear in firm in saying that this program, although aiming to prevent foreclosures, is not going to save every home and will definitely ignore those who bought houses that are beyond their paying capabilities.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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