Details are still sketchy…apparently, the Obama team will create an industry standard for how mortgages will be modified. So far, there is no mention of principle write-downs, just a continuation of the current policies of lower rates and longer terms to push payments lower.
The 2 big changes are these:
1. The Government will match the dollar amounts that the banks can reduce your payment…For example, if your payment is currently $2,000 per month and you can only afford $1,400, the bank will change terms of the loan to reduce payments by $300 per month, and the Government (we taxpayers) will pay the other $300.
2. Homeowners can apply, even if they are current on their payments (meaning lots more people will apply).
Reuters is reporting Obama eyes home loan subsidies in rescue plan: sources
WASHINGTON (Reuters) - The Obama administration is hammering out a program to subsidize mortgage payments for troubled homeowners who have gone through a standardized re-appraisal and affordability test, sources familiar with the plan said on Thursday.
The program would be a major break from existing aid programs, which are triggered once homeowners fall into arrears.
Under the plan being contemplated, mortgage companies would use a uniform eligibility test even before a borrower becomes delinquent, sources said.
The administration hopes the mortgage industry will soon agree to a set of standards that will allow it to move quickly to modify many home loans.
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