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The Latest Plan to Help Homeowners
(3/4/09)

In an unprecedented move, the government is committing billions of dollars to help homeowners in danger of losing their homes. The program which begins on March 4 is touted to reach as many as 9 million borrowers by allowing them to modify the existing terms of their mortgages.

Treasury Secretary Geithner described the program as a safety net and encouraged lenders to move rapidly to deal with the mounting foreclosure problem. “It is imperative that we move with speed to help make housing more affordable and help arrest the damaging spiral in our housing markets.” Geithner said in a prepared statement.

The provisions of the bill require borrowers to provide their most recent tax return, two pay stubs, and a statement showing financial hardship in order to qualify for the program which runs through 2012.

Under the terms of the program, dubbed the “Making Home Affordable” initiative, homeowners are only allowed to have their loan modified once, and their loans must have originated on or before January 1, 2009. Mortgages above $729,750 will not qualify for the program.

The modification program is expected to reach as many as 4 million borrowers. Additionally, up to 5 million mortgages backed by Fannie Mae or Freddie Mac are eligible for refinance through June of 2010. Congress is also debating legislation that would allow bankruptcy judges to modify the terms of mortgages for homeowners facing bankruptcy.

While it is hoped that the new programs will help millions of homeowners, it’s not certain what the ultimate outcome will be, as home prices continue to decline, with as many as 20% of all homes with mortgages now worth less than the loan amount. According to the S&P/Case-Shiller Home Price Index, home prices dropped 18.5% in December from the previous year, the largest drop in the 21-year history of the index.

With the new initiatives, however, those near or in danger of foreclosure are encouraged to immediately contact their LENDER to see if they qualify for the new program. Homeowners are reminded to avoid companies that offer foreclosure prevention for a fee, and to deal directly with their bank or mortgage company.

 

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