Posts Tagged ‘default’
Let’s face it; you may be one of the millions of Americans who may lose their home to foreclosure. Even though this is a harsh reality, the government has made provision and now this program, funded by stimulus money has been called the Obama mortgage relief plan.
If yours is not a government-backed loan, but you are paying more than 31% of your gross monthly income, you may also qualify. One of the ideas of Obama Mortgage Rescue Plan 2011 is to also help people lock in the lower rates offered today even if they do not have the 20% equity that was previously required. However, the Treasury will not pay subsidies to lower rates below 2%.
The modification plan states that a servicer is to reduce the interest rate so that the homeowner’s monthly obligation does not surpass 38% of the borrower’s pre-tax income. The government then kicks in money to reduce the payments down to 31% of income. Also, as an incentive, lenders receive $1,000 for each modification and continue to receive $1,000 per year for the next three years as long as the borrower stays current on the loan. And the borrower gets up to $1,000 a year for five years as long as they stay up-to-date on their loan. This latter $1,000 per year goes to reduce the principal on the loan and thus the amount that is owed.
Homeowners looking to refinance or modify their current mortgages will get their loans restructured by mortgage lenders. With this plan, the maximum allowable monthly mortgage payment can not exceed 38% of the homeowners gross monthly income. Mortgage lenders will also get a dollars for dollar incentive from the government to further lower the monthly payments to 31% of the homeowners gross monthly income. This is great news for a lot of homeowners who are out of work or just struggling to make their monthly mortgage payment. A lot of homeowners currently pay 40% or even 50% of their income towards their mortgage. A 20% reduction would add up to a lot of saved money every month.
The Treasury of the United States has an exact series of guidelines for mortgage lenders and banks to complete when refinancing or modifying a home mortgage loan. In the past for example, mortgage loans have been refinanced or modified by adding on missed payments to the loans principal which basically did nothing to reduce the monthly payment. The Obama Mortgage Rescue Plan 2011 announced by Obama will mean a great amount of savings for millions of homeowners.
Learn more about Obama Mortgage Relief Plan Qualifications.