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The Stimulus Bill Breakdown
February 25, 2009
Obama Unveils Homeowner Affordability & Stability Plan
Last week, President Obama announced the Homeowner Affordability and Stability Plan as part of the broad, comprehensive strategy to get the economy back on track. The plan will help up to 7 to 9 million families restructure or refinance their mortgages to avoid foreclosure. The plan not only helps responsible homeowners on the verge of defaulting, but will assist neighborhoods and communities also, as defaults and foreclosures contribute to falling home values, failing local businesses, and lost jobs. So how do we really determine the fine print of the stability plan? How does it help you, me, and the failing economy? The Homeowner Affordability & Stability Plan...(now acronymoniously renamed HASP..By yours truly for the benefit of spacial compliance in the text) HASP provides two initiatives to help struggling homeowners. 1)a refinancing program for homeowners with less than 20% equity in their homes, or who owe more than the home is worth. 2)The second program attempts to lower monthly payments for homeowners at risk of losing their home. Both initiatives further enhance a third initiative which is to strengthen confidence in Fannie Mae & Freddie Mac. The details are still to be worked out and will not be fully announced until March 4 but we have included an overview of the plans main components.
Refinancing Initiative
Under current rules, those families who own less than 20% equity in their homes have a difficult time refinancing and taking advantage of the historically low interest rates. Therfore the new initiative plan provides refinancing help for homeowners with less than 20% equity in their homes or for those that owe more than their home is worth. This initiative is open to homeowners who have conforming loans which are guaranteed by Fannie Mae & Freddie Mac and who owe up to 5% more than the home is worth. According to the plan, "credit-worthy" or "responsible" homeowners can refinance their mortgage into a 30 or 15 year fixed rate loan based on current market rates. The refinanced loan, however cannot include prepayment penalties or balloon payments. For many families, this low-cost refinancing may help reduce their mortgage payments by thousands of dollars a year. As with the rest of the plan, details about this initiative will be released at a future date- including what if any credit score requirements will be included.
Stability Initiative
This initiative aims at providing help to individual families as well as entire neighborhoods by helping to reduce foreclosures and stabilize home prices. It is intended to help homeowners who are struggling to afford their mortgage payments, but cannot sell their home as prices have fallen significantly in some areas. The goal of the initiative is simple; reduce the amount homeowners owe per month to sustainable levels. "To accomplish this, lenders are encouraged to lower homeowner's payment to 31% of their income by lowering their interest rate to as low as 2% or by extending the terms of the loan. In addition, lenders can also lower the principal owed by the borrower, with Treasury sharing in the costs. Homeowners that are current on their mortgages but are struggling can still apply for this program. As such, this is one of the few programs designed to help homeowners who may face delinquency soon, but are current at the moment. Since the focus of this initiative is on helping families and neighborhoods, investment properties do not qualify. This initiative also includes a number of additional elements and incentives that benefit homeowners and lenders alike, including; *Incentives to help borrowers stay current; to provide an extra incentive for borrowers to keep paying on time, the initiative will provide a monthly balance reduction payment that goes straight to reducing the principal balance of the mortgage loan, he or she can get up to a $1,000 each year for five years. *Reaching Borrowers Early: To keep lenders focused on reaching borrowers who are trying their best to stay current on their mortgages, and incentive payment of $500 will be paid to servicers, and an incentive payment of $1,500 will be paid to mortgage holders, if they modify at-risk loans before the borrower falls behind. If you would like more in depth information regarding other details about HASP including supporting low mortgage rates,The tax credit for Homebuyers, Tax Credit versus Tax Deduction, Phaseouts regarding specifics on the homebuyer tax credit and allowances, Which homes will Qualify, What the higher loan amounts will be and more we would be happy to email or fax you the full comprehensive breakdown.
Posted
Thursday Feb 26
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