Homeowner Affordability and Stability Plan
"The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country." (Executive Summery)
Fallen property value due to foreclosed and distressed sales nearby and income reduction due to the job loss has made this plan to come about.
Starting Date : March 04, 2009
Homeowner Affordability and Stability Plan is to slow the rapid decline in the housing market by helping homeowners to lower the mortgage payment so they can afford the payment. The plan would spend $75 billion to help about 4 million families from foreclosures. And about 5 million would have a chance to refinance their current mortgage at lower rates, regardless of their current situation but must be eligible.
Affordable Refinances
Under this plan, Fed backed Freddie and Fannie will refinance up to 105% of the value. Good news for the homeowners and appraisers. The keyword here is the eligibility. The complete details about the eligibility will be announced on March 4th, the starting date of the program. Also, this 105% of the value applies to the first mortgage amount only, and the second mortgage will be pending on agreement by the lender who has the second mortgage.
So, this plan will help the homeowners with higher fixed interest rate with decreased house value to a certain point. Then, what about the homeowners with introductory teaser rates or the interest only mortgages? Well, this is the chance to get the lowest rate possible for the long run. Either you can just keep the low payment for now and have it ballooned few years later or change it into lower fixed rate for 15 or 30 years at this time with possible and most likely higher monthly payment. The choices are yours and get the 'Good faith estimate' from the bank to compare.
Foreclosures/Modification
Homeowners facing foreclosures can benefit from this plan and here's how. The HUD is estimating 3 to 4 million can benefit from this.
Now, only the first mortgage is eligible for this loan modification. The principle reduction for so called 'underwater homes (home's value less than owed)' are entirely at the lender's discretion and the Treasury will share the cost. Also, this plan gives the lender some incentives to encourage the loan modification. This includes up front fee of $1,000 for "Pay for Success" up to $3,000 and up to $5,000 applied directly to the debt if the borrower has made timely payment for 5 years, plus the Insurance payment against the further decline of the value.
Ok, that being said, what can one do to get the benefit of this plan? More than likely the lenders will be evaluating loans and send out letters after March 4th. It is suggested that the homeowners who think they qualify for a modification and do not receive a letter from the lender, they should contact the lender or HUD-approved housing counselor at www.hud.gov.
Preparation
What should the borrowers gather in preparation meanwhile?
My calculator does not have all those digits to accommodate $75,000,000,000, thus I dropped 6 '0's at the end and divided it by 8 or 9, representing 8 to 9 million homeowners. It is roughly $8,000 to $9,000 savings per eligible homeowner. Then again, it's only the average, be ready.
Data sources for this information
HUD website (www.hud.gov), Q&A posted on Whitehouse blog (http://www.whitehouse.gov/blog/09/02/18/Help-for-homeowners/) and me…..