This past Tuesday, President Barack Obama introduced an aggressive new plan to stimulate the economy, including helping many homeowners deal with the housing market. This is what I will be focusing on in the next few minutes. The plan is to be effective on March 4, 2008 and therefore, we won't know the exact specifications and guidelines as to who will qualify, how much aid they will receive, and how long it will take to trickle down to the actual homeowner.
First off, a few highlights of the plan:
*To help borrowers who owe more than 80% of their home's value refinance. Current lending guidelines make this very difficult and the new program will allow homeowners reduce their monthly payments.
*Give banks and servicers incentives for modifying mortgages to those who are still current. Many banks today require homeowners be behind before modifying their mortgage.
*Allowing judges to make mortgages eligible for modifications while active in bankruptcy. This is currently not allowed.
*Allowing more Treasury-backing for mortgages so that Freddie Mac and Fannie Mae can back more mortgages, thus making them eligible for assistance. The new plan allows only Freddie/Fannie-backed loans to be eligible for assistance.
Second: let me be frank about how much assistance will actually be available. The $75 billion that is being given to banks in the form of aid is a very small amount of money when you stack it up to the volume of mortgage debt out there. Meaning that not everyone will get a piece of the pie - there just isn't enough money available to help every homeowner requesting assistance.
Furthermore, a lot of the assistance is being given in the form of funding for new programs, repair and maintenance for buildings, building and rehabilitating low-income housing, helping communities buy and rehabilitate foreclosed and vacant homes, removal of lead-based paint, among others. So as you can see, not all of the money will be available to help homeowners directly with their mortgage.
Who Will Qualify & Who Is It For?
Not just because you own a home will make you eligible for assistance. So who will be eligible?
*If you owe more than 80% of your home's value but no more than 105% (including closing costs) and haven't been able to refinance due to this.
*If your mortgage is backed by Freddie Mac or Fannie Mae. Call your bank to find out.
*If your current mortgage rate is higher than the market rate (check out BankRate to check current mortgage rates).
*If you currently have an Adjustable Rate Mortgage (ARM), this will help you refinance into a 15- or 30-year fixed.
*If you occupy your property as your primary residence.
Who Won't Qualify & Who Is It NOT For?
*If you're trying to reduce the amount of your mortgage balance.
*Requesting assistance for an investment home, 2nd home, or vacation home (the bank will verify). However, if you live on a duplex, triplex, or fourplex but live in one of the units, you will be eligible.
*If you are requesting assistance on a 2nd mortgage. Only 1st mortgages qualify.
Like I mentioned earlier, many details are still to come. In the mean time, here are some very good websites to visit it to get more information:
*CNN's Anderson Cooper's Q&A
*Financial Stability
*Department of Housing & Urban Development
Ultimately, your mortgage company will be the ultimate source of information when this plan takes effect on March 4, 2008.
Manny Carrillo
REALTOR®
SJ Fowler / GMAC Real Estate
4015 S. McClintock Dr., Ste. 110
Tempe, AZ 85282
480.338.3062 - Direct
www.mannycarrillo.com
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