This week President Obama announced the Homeowner Affordability and Stability Plan. You can view a summary of this plan on the White House web site. Additional details are to be forthcoming on March 4^th.

The three legs of this plan are:

• Refinancing for up to 4 to 5 million responsible homeowners to make their mortgages more affordable
• A $75 billion homeowner initiative to reach up to 3 to 4 million at-risk homeowners
• Supporting low mortgage rates by strengthening confidence in Fannie and Freddie Mac

Earlier I wrote a blog on the 1^st leg, refinancing. Now I would like to share with you information on the second leg, stability! This component actually includes 5 sections. I will further elaborate on some of these sections in future posts.

A $75 billion homeowner stability initiative to prevent foreclosures and help responsible families stay in their homes

• A homeowner stability initiative to reach 3 to 4 million at-risk homeowners
• Clear and consistent guidelines for loan modifications
• Requiring all financial stability plan recipients to use guidance for loan modifications
• Allowing judicial modifications of home mortgages during bankruptcy for borrowers who have run out of options
• Strengthening FHA programs and providing support for local communities

President Obama declares that this is designed to reach out to homeowners that are struggling to afford and make their mortgage payments. Further this will focus on subprime borrowers and those that took out exotic loans. It is an attempt to help those that will commit to making “reasonable” payments to stay in their homes.

These initiatives are for owner occupied properties. The programs will not be available for owners of second home or investment properties. Also, your loan balance cannot exceed current Fannie Mae and Freddie Mac loan limits. This does concern me for those areas where jumbo loans were prevalent. Where will the help come from in those areas?

The premise is that the plan will aid in stabilizing home prices. Certainly, this would be one the best consequences if successful, in my opinion.

Loan modifications will be available to homeowners even before they become delinquent on their mortgage. This is another premise that I find myself in agreement with. Currently, in many cases, if you are not behind on your mortgage you run into a dead end trying to modify your loan or negotiate a short sale.

The goal of the program is to reduce the monthly payments, for those that qualify, to levels they can afford. There are a series of financial incentives to the homeowner, mortgage servicers and mortgage holders to participate in the plan. I will discuss those incentives in greater detail in later posts.

So this concludes the overview of the stability leg the latest housing plan. I will provide additional detailed information on some of the components soon.

What do you think? What questions do you have? I am interested in your observations. What will be the unintended consequences?

Next

The $75 Billion

Related Posts

Homeowner Affordability and Stability Plan---Part 1

What The Fed Is The Treasury Department Doing

Jay Williams

www.myhomeloanwithjay.com