Home loan: Mortgage Assistance Program

The new administration under President Obama announced the Mortgage Assistance Program in the beginning of the year. The government has granted a sum of seventy five billion dollars to help home owners who are in need of genuine help. This help is predicted to save almost five million home owners from foreclosures in the country. The government has launched programs after program to save the housing market. Many new bills are under consideration for being passed into laws.

The features of the assistance program include:

• The relief program aims at borrowers whose loans and mortgages have been taken from or are insured with Fannie Mae and Freddie Mac. The borrowers would be intimated by their respective lenders regarding their qualifying for the assistance program.
• The program lays stress on home loans that would become affordable to home owners for a long term. This assistance program asserts that the lenders cannot mitigate their loss by adopting foreclosure measures. Since the property rates are falling the lenders have been asked to consider loan modification programs rather than resort to drastic measures. This would save both the home owner and the lender. As an incentive to lenders encouraging loan modifications, the government has announced that lenders would be rewarded with thousand dollars per loan modification.
• Another very important change brought about the assistance program is the limit imposed on monthly repayment installments. According to the new rule monthly installments towards repayment of loans and mortgages should not exceed thirty one percent of the monthly income of the borrower. The total monthly payment installments for all other loans, debts and mortgages should not be more than fifty five percent of the borrower’s pre tax monthly income.
• The plan’s main aim is to stop foreclosures at all costs. Increase in foreclosure is the main problem being faced by the country’s housing market. Foreclosures have increased supply when there is no demand for homes with economic recession causing people to lose jobs and unemployment on the rise.
• Jumbo loans have not been considered in the mortgage assistance program. Thus they might not be of much use for people who have taken jumbo loans. But if these loans have been availed from Fannie Mae and Freddie Mac they might stand a chance to be considered along the lines of other loans.
• The loan modification eligibility criteria have been made stringent. Borrowers having less than twenty percent of home equity could not be considered for loan modifications till previously, the situations have changed. Equity is no more the criteria. Presently current value of the home and the mortgage amount has to be compared. If the mortgage amount is more than 105% of market value of house then you are eligible for the loan modification program.

The current market has lot of money and lots of houses. The demand has not started increasing yet.  But with proper adherence and following of the assistance program to the full many home owners would be saved from destruction due to their mortgages.