There is no hiding the fact that we are going through a rough economic time and President Obama is well aware of the struggles many Americans are facing. The housing market has taken hits from housing prices crashing all around to the foreclosure rate skyrocketing and in turn bring down the value of the surrounding homes be as much as 9%. It has gotten so bad that many homeowners are paying more than their home is actually worth. This has prompted President Obama to introduce the new housing stimulus plan. The plan was originally introduced in February but has just gone into affect this month. Due to the price on homes dramatic drop most people don’t have the required 20% equity in their homes for the traditional refinancing process. President Obamas hopes for this plan is to help struggling homeowners refinance or modify their home mortgage and avoid foreclosure. There are over 5 million people facing foreclosure and the presidents’ goal for this plan is to keep as many of them in their homes and prevent them from defaulting on their mortgage. The government has provided incentives to lending agencies so they use the new guidelines when approving someone for mortgage modification and refinancing. These incentives will reduce the lenders risk and as a result will become more flexible when taking applications for mortgage modification and refinancing.

Mortgage lenders that are receiving incentives will help homeowners restructure their current mortgage loans when looking to refinance or modify ones mortgage. Under the new stimulus plan the new restructured mortgage must not be more than 38% of the homeowners’ total monthly income. On top of that the government will offer a dollar for dollar incentive if the lender is able further decrease the loan to 31% of the homeowners’ monthly income. This a great plan for those owners that are struggling just to make their mortgage payment. There are many homeowners all around America that are shelling out any where from 40-50% of their monthly income for their mortgage payment alone. Reducing that by 20% means more savings and less stress.

When getting a mortgage refinancing or modification there are guidelines put into place by the Treasury Department that must be followed by the banks and lenders. In the past when refinancing lenders would simply add any missed payments to the principle of the loan which really would do nothing in reducing the monthly payments. This stimulus plan can mean savings and the possibility of staying in ones home.

-M Petrone

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