Who gains from Obama's housing plan?
Filed under: Economy
President Obama said his new housing plan isn't designed to help "unscrupulous or irresponsible" homeowners, but is aimed at those stuck in high interest mortgages and those needing loan modifications, as long as they can prove they can afford the loan after modification. People who bought a lot more home than they can afford will not be helped by this program.Basically there are two kinds of loan programs. The first program will help those who are current on their home mortgage but can't refinance to a lower interest rate because their home has lost value. The second program will help those who are at risk of foreclosure with loan modification. Full details will be available on March 4, which is the first day you'll be able to apply for the new loan programs. Both programs are designed to help people who seek help with home loans on property they use as their primary residence. Investors are not eligible.
First, let's look at what's available for people who are current on their mortgage, but can't refinance because their home has lost value. Obama hopes to help about five million people in this category. Right now most lenders require 80% loan to value. If your home has lost value and you no longer have equity in the home, you can't refinance to a lower interest rate even if it means your mortgage payment would go down. Under the Obama plan, Fannie Mae and Freddie Mac will make loans available for a 15-year or 30-year refinance up to a 105% of your current market value. So if your home's current market value is $200,000, you will be eligible for a mortgage of $210,000.
So how does this help? Suppose you bought a home for $250,000 and put down 20%, but you decided to do an interest only loan with a balloon payment or an adjustable rate loan that's much higher than current fixed rates. You're current mortgage is about $200,000 and your home is worth about $200,000. Prior to the new program proposed by Obama you'd be stuck with the higher interest loan. Now you'll be able to refinance to a low fixed rate provided you currently have a loan held by Fannie Mae or Freddie Mac or your loan was sold to Fannie Mae or Freddie Mac. You'll need to call your lender after March 4 to see if your loan qualifies.
The second group of people who will be helped are those who are at risk of foreclosure. These will be people already behind on their mortgage or who are struggling to keep their loans current. Obama hopes to help as many as three to four million people in this category. You don't have to miss a payment to be eligible for help, but you will have to prove that your income is no longer sufficient to make your mortgage payments. This can be because of several factors including loss of income, significant increase in expenses or an interest rate that will reset to an unaffordable level.
To be eligible for this program you must occupy the house as your primary residence, your monthly mortgage payments must be no greater than 31% of your monthly gross income and your loan can not exceed allowable Fannie Mae/Freddie Mac loan limits. For a single family home that's $417,000 in most parts of the country, but can go as high as $938,250 in high cost areas of Alaska and Hawaii for example. You can use the program for a two, three and four multiplex unit provided one of the units is your primary residence.
Lenders are most likely to lower your payments with interest rate reductions, but there are incentives in this program to lower your loan principal if your lender chooses to do so. To encourage you to retain home ownership the government is offering to reduce your debt by $5,000 if you pay on time for five years after getting a modification. There will be no cost for the modification. Lenders have been asked to review the loans they now have to find eligible candidates, but after March 4 you can call your lender to see if you qualify.
Lita Epstein has written more than 25 books including "The 250 Questions You Should Ask to Avoid Foreclosure" and "Surviving a Layoff: A Week by Week Guide to Getting Your Life Back Together."
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Reader Comments (Page 1 of 6)
2-18-2009 @ 8:30PM
vera salmons said...
The Presidents speech was interesting, but it had no mention of seniors who are in trouble with there mortages,It seems he never mentions the retirees or the seniors, Why ???
Reply
2-18-2009 @ 11:28PM
Israel perez said...
I'm a senior too and I know I will no be able to pay a 30 year mortage, so why is the bank do this kind of mortgages to senior citizens, that will never pay that money back
2-19-2009 @ 11:22AM
Doug said...
Because Obama's health plan is to cut out seniors from treatment, so they die. He has no use for us, we pay little taxes and we take from the illegals and welfare people. He wants us gone.
2-19-2009 @ 12:57PM
Marie said...
The Banks can not refuse you based on age. I refinanced my mom's home in 2007 and she was 88! Unfortunately she died a few months later. We needed to pull equity out of her home for her live-in help.
Hope that helps!
2-19-2009 @ 2:21PM
LORI said...
obama does not care about seniors only their vote......socialized medicine does not benefit seniors because they will be limited in their health care because wont be cost effective to keep an older person alive.. its like that in canada... believe me you dont want that...if you have been paying you payment there is no help for you....
2-18-2009 @ 9:35PM
James Raider said...
Are you responsible for your neighbor’s bad decisions?
http://pacificgatepost.blogspot.com/2009/02/obama-mitigating-mortgage-foreclosures.html
Obama and Congress appear to think so. Is there any common sense in this program?
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2-18-2009 @ 11:23PM
Camille said...
I'm sorry, but you must think that everyone out there is someone who got themselves in a situation that they shouldn't have. My husband and I have lived in our house for three years and never had a problem paying our bills. Now my husband is laid off and we are spending all of our savings to stay in our house. Not everyone out there made bad desicions. You should think twice before making stupid comments like that. One day you might lose your job too and be in a situation you have no control over, and then you might need someone to bail you out.
2-19-2009 @ 2:23PM
lori said...
no...
2-18-2009 @ 10:37PM
Kate said...
I assume that the neighbor that you are referring to is someone like me who lost theie job ? I used all my savings, my 401K
and maxed my credit cards because I haven't worked since
Sept. 2008 and my job fought my unemployment so I have zero income. I still may not even qualiify because my payment is obviously over 31% of my zero income & my loan isn't with Freddie or Fannie. So I will foreclose & this is why. I worked my whole life & went through every dime to save my home & credit.
This will continue to affect YOU TOO. I cannot help it if a bank will not hire a college graduate even to work as a bank teller which I apply for.
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2-18-2009 @ 11:23PM
kim said...
the only one's who should receive any help are those that have lost their jobs due to the economy. this does not include people that quit or those that have not worked before the economy hit the skids. i work my *** off making a living. i own a business that employs 26 people.
i worry about my family and their families. i have not laid anyone off and i will do whatever i can to prevent this.
where is my help to keep my business running so i can
help my employees stay in their homes and stimulate the economy. this is just a bunch of ****.
i am tired of baling out everyone. no help for those that
got in over their heads. we do not live in a fancy house, but i know alot who do who make 1/2 what we once did.
my house is paid for-we sacrificed for years to pay our mortgage. what about some of these dead beats?
for those laid off, you need help. for the lazy over spending
beat the jones', forget it!
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2-19-2009 @ 9:38PM
bob said...
The SBA is loaning more now than ever before at a lower cost. buying a building for your business you can get a 504 loan for 20 yrs. You can borrow money 7A @ SBA. Go on SBA.Com. I have made both loans in the ninties. I knew in 2006 that our economy was going down. I sold my business in early 2007 and closed the sale in Nov. 2007.
Hope you do well.
2-19-2009 @ 12:39AM
Rap said...
I would love to live in a house too.. eventually if I lose my job or can't make payments .. i too would like to depend on tax payers money. doesn't make sense for a renter like me to work my ass off and pay taxes to bail out people who are going to continue living in huge houses and driving high end cars. Should be straight forward... if you can't afford a payment.. get the hell out and rent.. stop depending on other people. I do feel sorry for people who lost their jobs but hey everyone goes thru that .. i was out of work in past.. but i ended up working two jobs to get my savings back on track.
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2-19-2009 @ 1:05AM
ari said...
about time for us to have a president that is not only making the rich become richer...thank you and god bless...MR PRESIDENT
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2-19-2009 @ 1:22AM
D.J. said...
Too bad it isn't this one!
2-19-2009 @ 1:42AM
nwillowk3 said...
You have got to be kidding! Thank this president???? He is going to destroy this country with his SPENDING SPLURGE!!! And then what do you know... we are on our way into Socialism where government will be telling us what we can and cannot make, have or do. Just like Russia and China and all the other socilistic or communistic nations whose citizens take a number and die while waiting in line for health care. God help us. This is just the beginning and our kids will never come out of this financial hit. Just think of how they will rememer us... We were duped!!! Thanks alot Dems. I hope you are happy.
2-19-2009 @ 12:54PM
mg said...
I agree with you thank God for sending us a president that knows what about diversities people, everyone not rich, not poor, and is poor. God will bless this nation because we have someone who look to the needy. the president is continue in my prayer, that things will work out in the next five years. We do make mistake, some have took advantage of those who had no idea about ajustable rate, they do not tell you everything, tell you to just sign here, and there, just trust them. The person that did mines and some of my friends loan are in the Federal prison now, because they fraud so much stuff when you gave the correct info, the title company (who you trust) was in on the fraud. I think God providing for people who was caught in the system
2-19-2009 @ 4:22PM
Jim said...
Well the government shouldn't be handing my tax money to anyone. If there is so much surplus - give it back to me.
2-19-2009 @ 1:54AM
Roger said...
And nothing for the working stiff, with 2 jobs and 2 mortgages, that isn't late, (just dead tired) and doesn't have an outrageous interest rate, {made smart decisions, and didn't get tricked into buying more than they needed}, but could use a bit of relief of having to work 13hrs a day, so his family doesn't become a burden to the rest of the planet?
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2-19-2009 @ 1:39PM
John said...
Absolutely correct Roger. I too work 60 to 70 hours a week to assure that my mortgage is paid, my ex gets her child support lottery, and my present family is fed. My mortgage is at 6.75 %. And my wife hasn't worked in over a year. I'd love one of those 4% refinnances.
2-19-2009 @ 11:43AM
tbinstlmo said...
Sorry Roger, this is a president who wants you to depend on him and his party for everything. They will do anything they can to make you rely on them because they think that you can't make decisions for yourself or support yourself. Laziness is being rewarded. I also have worked my tail off to get into a modest house that I can afford - but self-sufficiency is not part of the new socialist movement, so you will get nothing for your hard work. As I once read, a liberal would cut your legs off so they can give you crutches.....