President Obama was in the Phoenix area today to announce details of the Homeowner Affordability and Stability Plan. I guess the White House considers this area to be near ground zero of the housing bust and hence the area to be most hurting due to the housing downturn.
The plan is to help those who are in genuine need of assistance. The President said, “it will not rescue the unscrupulous or irresponsible and, it will not reward folks who bought homes they knew from the beginning they would never be able to afford.” According to the NYTimes, “the core of the plan gives banks a financial incentive to reduce many mortgage payments to no more than 31 percent of a borrower’s income.” The Wall Street Journal has a very good summary of the entire bill for those interested.
So who exactly will benefit from this? The White House blog says the exact details of who is eligible will not be announced until March 4. However, the blog does have some answers to key questions, such as for:
Those who owe more than their house is worth:
Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.
Those with both a first and second mortgage:
As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.
Interst rate and terms of the new mortgage:
The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate.
Those who are at risk of losing their homes:
The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.
Those who are in immediate danger of losing their homes:
Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower’s eligibility. We support this effort.
Read the full post on the White House blog, there’s a ton of information there. It should answer a lot of your questions.
photo credit: aflcio2008
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on Mar 4th, 2009 at 6:51 am
There are many loopholes in this new mortgage assistance plan. Many of those who are under water in their mortgages, refinanced them, taking cash out, as the values of their homes increased. The cash-out money was used to buy fancy cars, speculative real estate and pay off credit cards used to buy items the individuals could not afford without a rising value housing market. NOW, suddenly, their home debt is more than the value of their homes (SURPRISE!!!!!!) and they are crying to the government for a “bailout”. Much bad behavior will be rewarded, again, while those of us who took the responsible road are paying for their bailouts. It’s just another scam, just like the AIG bailout, bank bailouts. The mortgagors could no better manage their daily lives, making poor decisions, just as the multi-million dollar salaried bank CEOs did. It’s disgusting!
on Mar 4th, 2009 at 9:07 am
Robert,
Thanks for taking the time to respond. Your concerns are certainly valid. We’ll see how we can get out this mess.
on Mar 4th, 2009 at 9:23 am
[...] to help struggling homeowners was announced today. This plan was announced a few weeks ago as the Making Home Affordable initiative. From the details which were announced today this plan helps two types of homeowners and applies [...]
on Sep 14th, 2009 at 5:50 pm
I have a client that applied for a home modification. Their payment was $1200/month. Bank came back with reducing the payment $70/month. They are being contacted by Anthem Investments International in Orange, CA and being told that they are attornies and will work with their bank and have the bank forgive $140,000 and only require that they pay $74,000 which is what it is worth now. They want a $3000 cashier check up front to do this. Can’t find the company listed anywhere and they are not registered with the Better Business Bureau. Has anyone heard of this company? Are there any places in the Phoenix area that a legitimate and actually are successful at doing home modifications? Thanks.
on Aug 16th, 2010 at 12:00 pm
We had hoped buying our home was a good investment, but then the market crashed and we’re majorly updside-down on our mortgage. We also want to leave Arizona and can not sell our home to even cover the balance on our mortgage. Do we just walk away? We have never missed a payment and are not in trouble financially…we just want out. The value of our home has dropped probably 180k. Our house is currently assessed at 109k and our mortgage balance is 167k. How can we protect our assets and get out of this mess? I’ve contacted my lender and we don’t qualify for refinance unless we give them more of our own money to make up this difference. I am not willing to do that. It will take “forever” for the market to get where we might break even and I don’t want to wait that long. We are responsible people who did the right thing and have gotten caught up in this housing debacle and seem to be paying the price for others’ mistakes. I am angry and frustrated. Any advice?
on Sep 4th, 2010 at 5:39 am
Not everyone who refinanced or took cash out is “irresponsible” or guilty of doing the “wrong thing”. We did both because I lost my job, couldn’t find one and needed the cash out to help me start a business and help cover my very ill spouse’s medical bills.
My business did very well for a couple of years until the economic downturn. Our mortgage is now underwater by 60% (about $500K). Like the person above, we want to leave AZ where there is a better job market and to be closer to family but we too are stuck here since we can’t sell. The first of two resets on your moortgage will hit is in Oct. 2011. We cannot show enough income at present to qualify for a Mod of any type we know of. The new program that Obama recently signed would be perfect for us except we are disqualified because we ReFied and our ReFi was on the basis of stated income. We have no liquid assets, 401K, pension, stocks/bonds or other real property. We are now on state assistance for healthcareand are behind two mortgage payments. Is there ANY program for a homeowner in this situation? I believe my business will pick back up in a year or so after my spouse has needed surgery and is recovered enough that I can spend more time on my business.