President Barack Obama’s Plan to Stem Foreclosures
Yesterday, in Phoenix Arizona, President Obama laid out a bold $75 billion, three-part plan that is a major step in trying to halt the huge number of foreclosures occurring nationwide. A major part of this plan is to encourage homeowners with homes that are now worth less than their current mortgages to refinance to a lower debt load. This lower debt load is part of the incentive plan thus provided to banks and lenders in hopes of stemming future foreclosures. The Homeowner Stability Initiative, which this new plan is being called by the Obama administration, seeks to address possibly the major trigger of the global financial crisis: the 2.3 million U.S. foreclosures last year which were a driving force in the decrease in home prices nationwide as well as a huge tumble in consumer confidence.
“When the housing market collapsed, so did the availability of credit on which our economy depends. As that credit dried up, it has been harder for families to find affordable loans,” Obama said. “In the end, all of us are paying a price for this home mortgage crisis. And all of us will pay an even steeper price if we allow this crisis to deepen - a crisis which is unraveling home-ownership, the middle class, and the American Dream itself.”
The Obama plan's main initiatives seem to be helping delinquent and/or at-risk borrowers to get their mortgages modified by the lenders so that at maximum no more than 31 percent of their income goes toward payment of their mortgages. For a fairly complete Q&A on Help for Homeowners for all of you here in the Santa Barbara CA area who own Santa Barbara Real Estate (as well as nationwide), you can can visit the White House Blog. Here you can learn about the plan's goals whether you are or are not current on your mortgage. Here are a few excerpts from the plan below...
- I owe more than my property is worth, do I still qualify to refinance under the Homeowner Affordability and Stability Plan?
Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.
- What help is available for borrowers who are at risk of foreclosure either because they are behind on their mortgage or are struggling to make the payments?
The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage. For information in general on Santa Barbara Real Estate, Montecito Real Estate and/or our surrounding areas, as well as any other aspects of life in our area, please don’t hesitate to contact Kevin Schmidtchen at Berkshire Hathaway.
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