Homeowner Affordability and Stability Plan

President Obama and his administration have been working on a plan to help homeowners avoid foreclosure by making monthly mortgage rates more affordable and available. The program was announced on February 18 (the day after the new economic stimulus plan was signed into law) and is slated to begin on March 4.

Full details of the program will be available in early March, but here is a quick rundown of how it will help American homeowners...

First of all, homeowners who are still keeping up with their mortgage payments but were unable to refinance because they owe too much on their homes may be eligible to refinance for lower interest, fixed-rate loans under Fannie Mae and Freddie Mac.

The program impacts loans with or securitized by Fannie Mae and Freddie Mac where the amount the borrower owes is not higher than 105% of the current market value of the home.

A second part of the plan would assist homeowners at risk of loosing their home to foreclosure. Lenders will get incentives to give struggling borrowers lower rate loans. The objective is to get monthly mortgage payments down to 38% of a borrower’s monthly income or less, at which point the government will provide a dollar-for-dollar match to bring payments down even more – to 31%. Borrowers who are not yet delinquent on their mortgage, but have insufficient incomes to cover their payments may also benefit.

Ultimately, it is up to your lender to decide whether or not they will participate in the program, which is voluntary. All loans would be subject to individual consideration and evaluation. Homeowners interested in knowing if they are eligible for mortgage modifications should talk with their lender. Prepare by gathering income documentation, tax returns, credit card debt, second mortgage info, and other loan payment schedules (e.g. financed car, student loans).

There are several other elements of the plan that we did not touch on here, but we can send you literature on the full details released up to this point.