Obama Housing plan

The finer details of the Obama Housing Policy have been released. What does this overly complex plan entail and who will benefit from it? 

Firstly, primary homeowners who are having a hard time paying their mortgages can now work with their lender to modify their mortgages. $75 billion in incentives will be offered to help prevent foreclosures. Mortgage servicers will be able to take advantage of financial benefits if they work to modify loans. Adjusted monthly payments are prohibited from being in excess of up to 38% of the homeowner’s income. The government will subsidize part of if not all the difference and ensure that not more than 31% of the borrower’s monthly income is tied up in a mortgage payment.

Secondly, homeowners who have not been able to refinance due to decreased property values and have a mortgage higher than their home’s worth, may be able to take advantage of loan modification and refinance. $200 billion has been slated to help these homeowners refinance. The administration estimates there are 5 million homeowners in need of this assistance. However, the current mortgage must be at most 5% higher than the value of their home. Mortgages must be owned by Fannie Mae or Freddie Mac and homeowners must be current on their existing loans. 

There is speculation that refinanced and modified mortgages may have interest rates as low as 2% for five years. That, however, is not a reality as of yet, and it is not easy for all lenders to arbitrarily modify mortgage products. The investors behind the mortgages will have the final say. If a lender takes bailout money then the law requires them to modify mortgages that are in danger of defaulting. This can cause conflict between the bank and the investor behind the product.

The plan is very complex and full of details. For more information on President Obama’s Housing Plan, please visit www.financialstability.gov.

If you are not sure how Fannie Mae, Freddie Mac or the housing plan pertains to you or pertains to your loan situation, please call your mortgage service provider or bank.

If you are interested in more information about Fannie Mae or Freddie Mac, please click on one of the following links.

- Fannie Mae at 1-800-7FANNIE , online at www.Fanniemae.com
- Freddie Mac at 1-800-FREDDIE, online at www.freddiemac.com