Obama’s foreclosure plan will of course aid individuals in default, but along with that it will also help homeowners who are in danger of defaulting in the future. This preventative measure is naturally drawing praise from the real estate industry. For more information, read the following article from Property Wire.
The Obama administration yesterday outlined key details of its $75 billion property rescue plan expected to help as many as 9 million homeowners rework mortgages into more affordable monthly payments.
The announcement was welcomed by lenders and the property industry, especially the fact that lenders can modify mortgages if a borrower isn’t late with payments but is at risk of default. This addresses a key criticism that the program would only help those who were already on a downward spiral. It will be in place until the end of 2012.
Borrowers who want to qualify for the loan modification plan will have to provide proof of financial need and payment ability, including an affidavit of financial hardship, their most recent tax return and two pay stubs.
Up to 5 million homeowners with a solid payment history on mortgages held or owned by Freddie Mac and Fannie Mae will be eligible to refinance into more affordable terms even if they have less than 20 percent equity in their properties. However, an appraisal may be necessary.
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The program will apply to loans made on or before January 1, 2009 and modifications will be allowed only once. Those with first mortgages of more than $729,750 will not qualify.
"The announcement means you should call your lender to find out if you qualify. This should get the ball rolling," said Lawrence Yun, chief economist with the National Association of Realtors.
"I like the plan because it addresses homeowners who are not behind on payments. It addresses people who could default. It’s proactive," he added.
Requests for loans to buy property and refinance mortgages dropped for a second straight week last week as potential borrowers held back in hope of even lower mortgage rates and help from the Obama rescue program.
The details also set out that lenders will be required to use a formula on each loan that is 60 days past due or delinquent. Lenders should take into mind the likelihood that homeowners can afford terms of the new loan and must follow an established process to reduce the monthly payment to no more than 31 percent of the borrowers’ gross monthly income. To do that lenders will first reduce the interest rate on the loan and then could extend the term of the loan to as many as 40 years.
Servicers will get financial incentives, such as an up-front fee of $1,000 per modification, to encourage participation.
This article has been reposted from Property Wire. View the article on Property Wire’s international real estate news website here.