Regardless of what you think of President Barack Obama’s initiatives and approach to assisting homeowners, here is a core breakdown of his housing crisis plan.
1. Refinancing help for four to five million homeowners who receive their mortgages through Fannie Mae or Freddie Mac
2. New incentives for lenders to modify the terms of sub-prime loans at risk of default and foreclosure
3. Steps to keep mortgage rates low for millions of middle class families looking to secure new mortgages
4. Additional reforms designed to help families stay in their homes
Read this entry from the White House blog that also has links to fact sheets and FAQs.
More details were released today that include:
* Eligible borrowers must be screened for financial hardship. A change in circumstances must be verified through documentation.
* Servicers must follow a sequence of steps to reduce the payment on a primary mortgage only to no more than 31% of monthly income:
1. Reduce the interest rate to as low as 2%.
2. Then, if necessary, extend the term or amortization of the loan to as much as 40 years.
3. If the monthly costs are still too high, temporarily suspend principal payments or even forgive some of the principal.
More information here.