It will have three major components
1. Low cost refinancing for upto 4 to 5 million responsible homeowners (those who are current on their payments, but who are paying high interest rates and cannot refinance because they do not have enough equity in their homes) to make their mortgages more affordable by reducing their interest payments. This will remove the current restriction on Fannie Mae and Freddie Mac that prohibits them from guaranteeing refinancing on mortgages valued at more than 80% of the home's value.
2. A $75 billion Homeowner Stability Initiative to reach upto 3 to 4 million at-risk homeowners and keep them in their homes. The government will offer incentives to lenders to alter the terms of loans to make them affordable for the troubled borrowers.
3. Supporting low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac through direct purchases of their debts as part of the quantitative easing measures announced in November 2008. This will substantially increase the credit available for newer mortgages.
More analysis on the Plan is available here, here and here. A nice NYT interactive graphic sums up the Plan.
Update 1
The Obama administration announced the full details of a $75 bn homeowner bailout plan, that seeks to help 4 m people avoid foreclsoures. People with mortgages as high as $729,750 could qualify for help, and there is no ceiling on how high their income can be as long as they are in danger of losing their homes. Interest rates on loans could go as low as 2% for some and many homeowners could see their mortgage payments drop by several hundred dollars a month, and some could save more than $1,000 a month.
Update 2
FAQ on Housing bailout plan here.
2 comments:
This site is unusually helpful on the topic of loan modifications, since other information online (direct from the U.S. Treasury and related websiste) is on-point but is still either biased in favor of
hyper-technical readings of the Plan or a watered-down version intended for an uneducated public. I did find a site called HomeAffordPlan.com that seems to bridge the gap.
To find out whether you qualify for the Obama Housing Bailoutt, check your financial statements and do the math. You’ll only qualify if your monthly payments are at least 38% of your income.
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