Will Home Mortgage Relief Plans Work?
On August 31, the President addressed the nation about the housing market.
His speech took place exactly one month before we’ll see a record-breaking $50 billion in mortgages reset to a new rate.
In the month of October alone, many homeowners will be forced to pay higher monthly mortgage payments than they can reasonably afford.
And while this number is staggering, it’s not exactly new information - it’s been known for two years that the crisis was coming.
In all, two million homeowners have adjustable rate mortgages scheduled to reset by the end of 2008.
Of those, the FHA estimates that 500,000 could experience foreclosure.
In the opinion of some, the president’s proposal is an excellent start - but will it offer enough help to those half-million families at risk of losing their homes?
Bush isn’t proposing a direct bailout for all homeowners who overextended themselves. Nor will the government be rescuing irresponsible lenders and speculative investors who bought homes to flip for a profit.
As the president acknowledged, that would only encourage the problem to occur again. Instead, Bush’s proposal strikes a balance by offering:
- Temporary tax relief to ensure that canceled mortgage debt on a refinanced mortgage isn’t counted as income
- A foreclosure-avoidance initiative through homeowner education
- Ways to help responsible homeowners refinance through FHA loan programs offering lower rates and monthly payments
Among the president’s new initiatives is the introduction of a refinancing product called FHASecure. This product will now be offered through the FHA and offers help to homeowners who are already in default of their primary residence mortgage loans.
Previously, an FHA loan would not cover a borrower for refinanced loans from borrowers delinquent or in default, so this is significant.
There are criteria that must be met in order to qualify:
- First and foremost, you must have a history of on-time mortgage payments before your teaser rate expired - which means decent credit.
- Your rate must have reset after June 2005 but before December 2009.
- You must have at least 3 percent cash or equity in your home.
- You must have a sustained history of employment.
- You must have sufficient income to make mortgage payments.
Continue reading this Yahoo! Finance assessment of the new plans for the U.S. government’s home mortgage assistance …