First news on MarketWatch on Obama’s plan to help halt foreclosures.
There are two programs. One to help 4-5m struggling home owners with loans owned or guaranteed by Fannie Mae or Freddie Mac to help them refinance.
The other is a loan modification plan with government subsidies to lenders to reduce their monthly interest payments.
- Lenders responsible for bringing down interest rates so the monthly mortgage payment is no more than 38% of pre-tax income
- After that the government would match the amount reduced by the lender to bring the payments down to 31% of their pre-tax income.
- $1,000 incentive for loan services for each successful loan modification and additional funding for each month the borrower stays current on its loan
- Homeowners also receive $1000 a year for five years, as long as they stay current on their loan payments.
- Additional incentives to lenders who modify at risk loans before the borrower falls behind
As part of the larger housing plan, it is expected that there will be an announcement that lets bankruptcy judges alter mortgages and lower interest rates for troubled homeowners
In a smaller separate program there is expected to be funding of $1.5 billion to help renters relocate who have been displaced by foreclosure and $2 billion to stabilize neighborhoods hit by high levels of foreclosure.
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February 18th, 2009 at 4:19 pm
Far too many incentives for lenders and rather than incentivize them to help home owners, they may get greedy chasing incentive bonuses.