Yesterday President Obama allowed Geithner and his Treasury Department to once again speak to the media. They’ve finally given us the details on the $75 billion program designed to help people stay in their homes. The banks stocks took a beating on this news and a report that 20% of mortgages or underwater (meaning the mortgage is worth more the home) Here are some quick highlights on the qualifications and length of the program:
Loans must have been originated on or before January 1, 2009.
Program ends December, 2012.
Loans can only be modified once.
The home cannot currently be vacant.
Program applies to first lien mortgages up to $729,750 in principal balance.
The rules are designed to keep “investor types” and “flippers” among other people from exploiting the system. Get a full list of details here.
This program will allow homeowners to reduce their interest rate up to 2% in an effort to bring their monthly payments down to 31% of their income. I guess if you cannot get it down to 31%, then you are a lost cause. Borrowers do not qualify if their mortgage is worth more than 5% more than the value of their home. This means people with a $350,000 mortgage on a home worth $300,000 will not qualify. Many people will feel left out, but it would appear the administration doesn’t want to take any huge risks.
Another section of the plan address people who are having difficulty refinancing their loans. This would mean they can probably afford their house, but just need to refinance into a fixed rate or something. The qualifications are vague in the article, but you will only be eligible for assistance if you loan is currently owned by Fannie or Freddie. Since the government controls these institutions, they have more power to force a ReFi.
This plan is not to be confused with a bill currently making the rounds in Congress that will grant judges the ability to re-write troubled mortgages. That is simply a terrible idea, but I withhold judgment until the full extent of their “new power” is made public.
As per his promise for keeping us little people informed about it’s progress, Obama has launched a website to monitor the status of the program. This website is FinancialStability.gov. I applaud this effort, though I haven’t yet marinated on the this modification program enough to determine whether or not I like it. Follow me on Twitter over the next few days for updates.
Photo: Mr Frosted
 By The Weakonomist |
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