At first glance the new President Obama housing rescue plan is playing to mixed reviews. Some critics say it doesn’t go far enough to solve the housing mess this country is now in. Others express resentment at helping people who took on more house than they could afford or somehow mismanaged there money irresponsibly. These may have elements of truth in them, but the fact is the President has to begin to take action to stop the bleeding. What most of the critics overlook is this is a beginning, not an ending of the actions the President will take. It’s unrealistic to think the President will solve this massive problem with one plan, action or decision.
The mortgage rescue plan basically gives banks a financial incentive to reduce homeowners mortgage payments a maximum of 31 percent of the homeowners income. The borrowers that will benefit most from this payment reduction are those who had a reasonable mortgage loan, but through no fault of their own lost their job or had their hours slashed. Many critics resent footing part of the tax bill to help homeowners in trouble. However, this appears to be the quickest and best way to stop the flood of foreclosures. One benefit those critics will receive is the decrease of the value of their homes slowing down and in time stopping. Because the more foreclosures in their neighborhood the more value their home loses.
The mortgage rescue plan will also help homeowners who are underwater so-to-speak. That is homeowners who owe more than their home is worth – provided they can still afford the monthly payments. The plan will help these homeowners. How? By offering incentives to banks to reduce interest rates and restructure loans. In fact, banks who received bailouts funds are required to participate in the program.
What are the other requirements?
Home interest reductions and loan refinancing are available to loans backed by Fannie Mae (The Federal National Mortgage Association) or Freddie Mac (The Federal Home Loan Mortgage Corporation). Many of the sub prime loans were not backed by Fannie Mae or Freddie Mac. Experts predict 1 out of 10 homeowners in trouble will be helped by the plan. But remember this is just the beginning. What the President is attempting to do is to restore confidence. It’s similar to starting a dead battery on a cold night. It’s a waste of time to focus on all the parts of the car like the engine, the transmission or the lights. You have to focus on jump starting the battery first and the rest will start to fall in place. I’ll continue to keep you informed and walk you through this President Obama rescue plan and how it can help you as a homeowner. Stay tuned.
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