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While there’s been plenty of colorful and lively commentary here at Blown Mortgage regarding the necessity of the mortgage bailout, all points are pretty much moot. It’s been passed, and it’s going into effect, so the only thing to do now is to hope it does well and helps to achieve its goals. These include helping to stabilize housing prices, keep homeowners in their homes, and stem the foreclosure tsunami that’s contributed to the deepening recession. None of that will be particularly easy, of course, but the government recently released details as to how it’s going to operate.
The program aims to call companies into helping about 4 million struggling borrowers. This will be accomplished by modifying their loans so that monthly housing payments are no more than 31% of monthly gross income. Homeowners who have yet to miss a payment are also eligible to refinance into lower cost loans. The lenders themselves will be provided with incentives in order to “encourage” them into providing more modification efforts. Uncle Sam will pick up some of the tab to subsidize interest rate reductions, too, which means more affordable monthly payments without borrowers eating too steep a drop in revenue.
Housing Secretary Shaun Donovan seemed fairly optimistic: “This plan will help make home ownership more affordable for nine million American families and in doing so, help to stop the damaging impact that declining home prices have on all Americans.” He said.
Not everyone will be able to participate in the modification party, however. As you might expect, there are some requirements that borrowers have to meet. They have to have obtained this mortgage before the beginning of 2009, so if you’re thinking you can buy an ultra large house and then cry foul when you can’t afford it and receive aid, you’re out luck (for those of you who did so before 2009, I have no choice but to tip my hat to you). You’ll also need to have a mortgage of less than $729,500, so McMansions are out. You’ll also need to agree to counseling for your household debt if it’s more than 55% of your income. Personal finance classes required by the government? I’m actually pleased at that development.
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Last 3 posts by phillenbrand
- Loan Modification Fix - July 20th, 2009
- Free Home Loan Modification Help For Homeowners - July 10th, 2009
- Would One Mortgage Regulator Work? - May 21st, 2009
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