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Big Roles of Agencies and Firms in Obamaís Foreclosure Plan

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By : John Cutts    99 or more times read
Much of the success of Obamaís $75-billion foreclosure plan, now dubbed Homeowner Affordability and Stability Plan, will depend on the implementation of schemes by government agencies, government corporations and private mortgage firms.

Obamaís plan focuses on loan refinancings and loan modifications that would reduce monthly mortgage payments affordable and sustainable for troubled homeowners. The success of these processes would depend on agencies and corporations that will work out these loan restructurings with the borrowers.

The top agency involved is the Treasury Department. This is the agency that will provide the $75 billion approved by Congress to fund Obamaís foreclosure rescue plan. Aside from that, it will also fund Fannie Mae and Freddie Mac so that these two corporations can continue to maintain the strength and stability of the mortgage sector. It will continue to buy Fannie Mae and Freddie Macís mortgage-backed securities, increase stock purchase deals and increase the two firmsí mortgage portfolios to $900 billion.

Two of the most involved government organizations are government-controlled mortgage giants Fannie Mae and Freddie Mac. The first key requirement for homeowners to be eligible for loan restructuring is that their mortgage loan should have been issued, guaranteed or serviced by Fannie Mae or Freddie Mac. Fannie Mae and Freddie Mac are at the center of the foreclosure rescue scheme. They have been ordered to develop standards or benchmarks for loan modifications for mortgage lenders to follow. They will also need to ensure that mortgages are available and affordable for all responsible homebuyers.

The other agencies involved are the Federal Deposit Insurance Corp. (FDIC), Department of Housing and Urban Development (HUD), Federal Reserve and Federal Housing Administration (FHA). These agencies will each contribute to the supervision of the implementation of foreclosure initiatives.

The housing finance agencies of all states will also be involved in the foreclosure plan. These state agencies will help homebuyers work out their mortgage loans with Fannie Mae or Freddie Mac and their mortgage banks.

Finally, the closest parties to the borrowers within the foreclosure program are the mortgage lenders. These lenders will decide whether to offer loan modifications to certain types of borrowers and to what extent will they reduce the loans so that they become affordable. Recognizing this, the foreclosure plan created a scheme so that the government will subsidize part of the reductions that the lender offers to troubled homeowners. Servicers will also receive a cash incentive of $1,000 for every eligible modification and another incentive of up to $1,000 per year for up to three years if the borrower keeps current the mortgage account.
John Cutts has been educated in the finer points of the foreclosure market over 5 years.

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