Obama Mortgage Relief

The Obama Mortgage Relief Plan

In March of this year, President Obama brought out a new mortgage relief plan which aims to help lower the number of homeowners forced into foreclosure because they can’t keep up with their mortgage repayments. Whilst it’s recognized the American government can’t single handedly resolve the current state of the housing market, President Obama feels that there are steps which can be taken to try and provide some form of relief to troubled homeowners.

What Does The Plan Involve?

Over the course of the past few years, the Federal Housing Administration has been increasing its rates to try and cancel out losses which have been incurred through the increased number of mortgages which have been defaulted.

Prior to this relief plan, any FHA borrower that was interested in refinancing their loan was required to pay an annual rate of 1.15% of the total amount borrowed. Under President Obama’s new relief plan this rate has been slashed by 50% and homeowners will now only be required to pay 0.55% annually.

In addition to this, the upfront fee charged to the borrower for refinancing will be just 0.1% of the total loan balance which is actually the minimum rate that is permitted.

It’s been estimated that through the cutting of these rates, the average family who is eligible will find themselves around $1,000 better off every year.

Who Benefits From The Plan?

In order to be eligible for these lower rates, your loan refinance has to have been done before the 1st of June, 2009. Rough estimates indicate that as many as 3 million homeowners could be eligible for these new rates.

Due to the fact that any mortgage taken from the FHA only requires an initial deposit of 3.5% of the house’s value, many first time buyers took these mortgages. After all, in current economic times when it’s harder than ever for the younger generation to get on the property ladder, who can really afford to pay a 10 or 20% deposit that most private mortgage lenders demand.

As part of this relief plan, some of the major mortgage companies will work together to analyze whether foreclosures suffered by military members were carried out correctly. Any party who is deemed to have been subjected to an unfair foreclosure will be entitled to a reimbursement of their lost equity and a lump sum of up to $116,785 as a form of compensation.

US homeowners have been hit particularly hard with regards to foreclosures and this plan is the latest attempt to aid those people struggling to pay bills and who are at risk of losing their homes.

Home Loan Modification and the Making Home Affordable Program

The following is a list of the current Home Loan Modification options offered under the MHA plan (taken from www.makinghomeaffordable.gov): Home Affordable Modification Program SM (HAMPSM), Principal Reduction Alternative SM (PRA), Second Lien Modification Program (2MP), FHA Home Affordable Modification Program (FHA-HAMP), USDA’s Special Loan Servicing, Veteran’s Affairs Home Affordable Modification (VA-HAMP), Home Affordable Foreclosure Alternatives Program (HAFA), Second Lien Modification Program for Federal Housing Administration Loans (FHA-2LP), Home Affordable Refinance Program (HARP), FHA Refinance for Borrowers with Negative Equity (FHA Short Refinance), Home Affordable Unemployment Program (UP), Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (HHF)