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The following is a summary of the $75 billion dollar rescue plan as more details emerged from the Obama administration on loan modifications for struggling homeowners. This is an effort to prevent future foreclosures. Briefly, this initiative can be summarized as follows:
Struggling homeowners who are unable to pay their current mortgage loan payment may be able to have their mortgages refinanced providing Fannie Mae or Freddie Mac are the loan originators.
Borrows would have to submit appropriate documents such as pay stubs, income tax returns and other financial information to support their income. They must also be willing to sign an affidavit acknowledging their “hardship” situation.
Mortgage payments can be reduced by lowering the interest rate to as low as 2 percent in some cases.
Additionally, the new mortgage loan would need to be reduced to no more than 38 percent of the borrower’s income and the debt to income ratio would need to be reduced to at least 31 percent.
If necessary, in order to make the numbers work, loan terms can be extended to up to 40 years as opposed to traditional 30 year terms.
In extreme cases, if the above two options still do not reduce the loan to 38 percent of the borrower’s income, then a “forgive the difference” in the principal can be exercised.
Unfortunately, for those borrowers who owe more than the value of the home there is little chance any existing program can be of assistance. Government officials have not been able to address these circumstances.
Homeowners who find themselves in a desperate situation or who may be facing foreclosure can be eligible for the program as long as the loan was originated before January 1, 2009; unpaid principal balances can be up to $700,000 plus. You do not have to be delinquent in order to qualify. You have until 2010 to apply for the refinance program. If you are not sure if your loan is owned by Fannie Mae or Freddie Mac, you can call your mortgage loan service provider and they can share that information with you.
Here are two websites to visit in order to get additional details: Fannie Mae or Freddie Mac.
The team at casanuevaguide.com recommends visiting with a Home Loan Counseling Agent in your area or contact the U.S. Department of Housing and Urban Development’s Web site www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm
Lisa C. Zapalac, Principal Partner and VP Public Relations for http://www.casanuevaguide.com has been actively working in the real estate and business industry since 1996; prior to opening her own public relations company Zapalac was named editor in 1991 for the Houston Chronicle Homeline and Real Estate sections.