A Rescue Plan for Homeowners Facing Foreclosure?

Obama Has Goal of Helping 9 Million Refinance Mortgage Loans

Feb 18, 2009

Last year, more U.S. homeowners suffered foreclosure filings than in any other 12-year period in the country's history. Barack Obama hopes to prevent a repeat in 2009.

According to RealtyTrac, an online provider of real estate data, foreclosure filings in the United States came in at 2.3 million in 2008. That's an increase of 81 percent from one year earlier, and the highest number of yearly foreclosure filings that the United States has ever seen.

Yesterday, according to a story in the New York Times written by reporters Sheryl Gay Stolberg and Edmund Andrews, Pres. Obama unveiled a new housing plan designed to slow the number of foreclosures across the country.

Halting Foreclosures

While unveiling his plan, Obama said it would help as many as 9 million U.S. homeowners refinance their mortgage loans or avoid foreclosure. The president said this would help stabilize falling housing prices.

Obama's plan boasts three main components. The first would provide assistance to homeowners who make their loan payments on time but are paying interest rates that are too high. This group of owners are currently unable to refinance because they do not have enough equity in their homes, or their residences are now, thanks to falling housing values, worth less than what they originally borrowed to pay for them.

The second portion of the plan would provide incentives to lenders to encourage them to alter the terms of mortgage loans they made to homeowners who are now at risk of foreclosure. The goal is to make these loans more affordable for homeowners who need just a bit of a financial break to hold onto their homes.

Creating a Source of CreditThe final portion of the plan would pump $200 billion of new financial backing to both Fannie Mae and Freddie Mac, the two government-controlled mortgage-finance companies that play such a key role in financing home mortgages.

This measure, it is hoped, would ensure that there is enough credit available in the country for people seeking mortgage loans.

This new housing plan is scheduled to go into effect on March 4. Unlike the $787 billion economic stimulus package that Obama signed earlier this week, the president can rely mostly on his executive powers to enact the housing rescue plan, the New York Times reported.

Help for Struggling Homeowners?

An interesting component of the plan is a $75 billion program that would help pay for loan modifications that would drop a family's monthly mortgage payment to as little as 31 percent of its gross monthly income. Lenders would have to make enough concessions to get the borrower's payments to 38 percent of the family's monthly income, while the government would match additional reductions to lower the payment to as little as 31 percent of the family's monthly income.

The copyright of the article A Rescue Plan for Homeowners Facing Foreclosure? in Home Mortgages is owned by Dan Rafter. Permission to republish A Rescue Plan for Homeowners Facing Foreclosure? in print or online must be granted by the author in writing.

Feb 26, 2009 9:26 AM

Guest :

Sub Prime neighbors already buying new cars because they know they will get this help. Their lawns still look bad and homes are falling apart.
All of this while poor Joe and his family are suffering because he lost his job. Joe worked for years and put money down on his home.
Bought his home the "old fashion" way....he EARNED IT!