How the Homeowner Affordability and Stability Plan Can Help You

As you likely know, the Obama administration has instituted a new plan to help homeowners facing foreclosure-the Homeowner Affordability and Stability Plan. The good news is that the plan actually reaches beyond merely helping those who are behind on their payments‚it will actually help those who are current with payments but have declined property values. It also is going to help the pre-foreclosure process in general, mainly loan modifications. There are three different sub-categories of assistance.

First, the plan is going to allow 3-4 million responsible homeowners access to low-cost refinancing and loan modifications, thus reducing monthly payments and creating a new loan that reflects the current value of your home. Hallelujah!dreamstime_68870781

Second, the new plan is going to create a $75 billion stability initiative to help at-risk homeowners who are struggling to make their mortgage payments but cannot sell their homes (because the home’s value has decreased below the amount owed on the loans). The goal of this part of the plan is to help people stay in their homes, and to protect neighborhoods from foreclosures that bring prices down even further. Loan modifications will be allowed BEFORE borrowers miss payments (something that has not been done up until now), thus supporting responsible homeowners.

This second part of the plan has some fantastic built-in financial incentives for both lenders and borrowers. Lenders will be paid for every eligible loan modification granted, AND also will receive monthly fees as long as the borrower stays current on the loan. This will continue for three years. Service providers will also be paid for initiating modifications BEFORE a borrower has defaulted on their payments.

Borrowers will reap some benefits too‚if they stay current with their payments on the new loan they will receive up to $1000 a year for five years toward reducing the balance of the principal on the loan. So if you fall under this category and get a modification, as long as you keep current on your payments for five years you will have your principal balance reduced by $5,000 at the end of that period‚Ķcan you say ‚ÄúFANTASTIC!‚Äù Really, how often does the government just give away free money?!

dreamstime_594147The final BIG news under this second part of the plan is that the government is going to create CLEAR and CONSISTENT GUIDELINES for loan modifications. This means that all lenders will have the same set of rules to follow when granting modifications. You have NO idea how much this will help you if you are a struggling homeowner, but let’s just say this is amazing‚no more bending over backwards to figure out what your lender’s program entails (only to find out that since yesterday the plan or offer has changed‚you might laugh but this is common practice).

There will be strict reporting and oversight between the Treasury, HUD, the Federal Reserve and other committees to make sure all the above guidelines are followed. Judicial modifications of home mortgages will be allowed in bankruptcy cases, renters of foreclosed properties will receive financial assistance and help with moving, and other government programs already in existence to help homeowners will be improved.

Third, the plan will support low mortgage rates by building confidence in Fannie Mae and Freddie Mac. This will increase stability and liquidity in mortgage-backed securities and help stabilize the housing market.

This plan is made to really help homeowners and our housing market. With strict oversight and adherence to the guidelines established by the administration, I think this plan could have a big impact on the housing market. But what I am most excited about is that it will help millions of people stay in their homes.

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