US President Obama has launched an aggressive mortgage plan with the objective of helping 9 million homeowners who are struggling to pay back their home loan due to nation’s financial crisis. Basically, the Obama plan is centered on two groups of homeowners: the first is those who are facing foreclosure due to missing payments and default, the second is those homeowners who cannot refinance to a better rate due to falling prices in the housing market.
The mortgage rescue plan is tailored to assist homeowners whose mortgages go above the value of actual home price and for those who are not able to pay their monthly installments of loan. the As per Obama mortgage plan, $75 billion has been sanctioned by the government to cut the home payments of various homeowners. $200 billion has been approved from the Treasury Department for the purpose of purchasing preferred stock in Fannie Mae and Freddie Mac.
Through this plan, Obama intends to help around 9 million homeowners. Further this plan would enable 4 to 5 million homeowners to refinance their home loans at lower interest rate. This plan also liberates Fannie and Freddie from all restrictions of refinancing mortgages. For the remaining 3 to 4 million targeted homeowners, who are at the verge of losing their homes would be provided incentives to reduce the monthly payments.
Additionally, the homeowner must document their financial situation fully via income tax return statements and pay documentation in the form of paystubs or pay statements. The homeowner must also prepare a financial hardship statement that details how and why they fell into financial difficulty that requires that their mortgage be modified. If the borrower has a total household debt that is greater than fifty-five percent of their income, the borrower must agree to go for credit counseling. The homeowner does not have to be late on their mortgage payment to qualify for mortgage modification. Once these qualifications are met, the mortgage lender can determine the amount of the new monthly payment in order to make sure that it is no more than 31% of your pre-tax (gross) monthly income and the interest rate can be as little as 2%. This provides significant savings that can keep the family in the home and allow the home to be its most affordable for them in the future.
Generally they want them lowered to roughly 31% of the borrowers gross monthly income and keep it their for a period of 5 years to help the borrower get back on track and also let property values increase. Under this plan only the troubled borrowers primary mortgage or ARM mortgage is covered and any second mortgage will not be included in the government mortgage rescue plan.
Learn more about Obama Mortgage Relief Plan Qualifications.