On April 28th, the Obama Administration came through on its promise to help homeowners who have come close to losing their homes and couldn’t modify their existing loan. What they did was expand their initial loan modification program to include second mortgages, which was a major hold up in many banks considering whether to give new loans to consumers.
Sometimes known as a home equity loan, in some circumstances it’s easier to get than a regular loan, far easier to get than a line of credit, and many people went this route when it became hard for them to keep up with their bills. However, the original loan program didn’t take second loans into account. This meant that banks were going to refinance one part of outstanding debt, but not the second part, and they didn’t want to do it.
In October, the Bush Administration created a program to help relieve some of the mortgage pressures called Hope For Homeowners, offering options to help people keep their homes. However, it didn’t include a provision for those people who had gone ahead and obtained a home equity loan, as many people don’t really consider that as a second mortgage; terminology can get confusing sometimes. That, along with many mortgage lenders making it harder for most people to refinance their loans, meant that many people weren’t qualifying for new loans, hindering the effectiveness of the program.
Interesting Fact about the Hope for Homeowners Plan – 1 homeowner has received a government backed loan from the program (Foreclosure Prevention Plan Expanded to 2nd Mortgages, The Washington Post)
This time around, the federal government will pay these mortgage lenders $500 for granting a modification on the homeowner’s second, then $250 a year for three years if the modification is successful. The expanded plan could help homeowners reduce their monthly payment on their second mortgage, and receive an interest rate as low as 1 percent (the government would share the loss on the rate reduction). It was estimated that around 50% of all the people who were attempting to get loan relief had taken out home equity loans and that the expanded plan could help as many as 1.5 million homeowners modify their second mortgage.
This is a nice addition to the program, but also a scary one. Along with the bank and corporate bailouts and the American Recovery and Reinvestment Act this is now more money coming from the Obama Administration that leaves critics wondering how it will be replaced and where it’s coming from. In the case of jobs, it’s easy to see how trying to get more people to work can help increase the tax base, which of course could bring more money to the government, but in this instance, it’s hard to see how the government can recover any of its money; from a humanitarian perspective however, it seems at this moment that it may be the right thing to do.
So, for now, there is new home relief, which is good for struggling homeowners. As with the rest of the recent spending, I guess our grandkids will have to worry about repaying our massive debt.
Check to see if you qualify for the Obama Administration’s Home Affordable Refinance
Sources:
The Wall Street Journal
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That will be nice for the seconds. Those second position lenders are taking huge hits when it comes to short sales.
Utah RealEstates last blog post..Utah areas are getting more affordable.
I think its the right thing to do. We can’t recover the economy until the real estate market is stable. People out on the streets aren’t going to be paying taxes either. It took us 8 years to get here so it will take some time to get out.
Charless last blog post..Hope for Distressed Homeowners
President Obama and his administration are doing right. He stops the foreclosure a bit and the house prices are more stable and slowly is the real estate market coming back.
I personaly agree with what President Obama is doing right now. No matter what bad decisions people have made in the past, others are paying for it.
I understand that it’s important for government to help people who can no longer pay their mortgages. But, it’s still unfair to ones who paid high housing prices and are still paying their enormous mortgages.
TaxForums last blog post.."Caring for Our Parents": My New Book on Long-Term Care
In my opinion, so far, $75 billions has not been adequate to persuade the domestic mortgage industry to properly do what is necessary to help Americans to live in their houses and keep the US economy from jumping into worse trouble. Actually, Some people prefer foreclosure as it allows them to postpone the reporting of a loss.
Here in the UK the bailout fund stands at 175 billion and we are still in trouble.
Jayne Peters´s last blog ..Remortgage My council house
I’m sure this helped many people remain in their homes and gave them the chance to get back on their feet and make the adjustments needed for the economic downturn. many have lost their homes. As long as this helps the people concerned and doesn’t see them worse off in years to come then it is an asset.