Many homeowners facing foreclosure have been in limbo now for several months – being assured by their mortgage companies that work-out options were in the offing and that they shouldn’t worry.
Some, who had missed so many payments that their mortgage companies rejected payments they attempted to make, were told to keep putting that mortgage money in the bank. The idea was to have funds available when options for keeping their homes were announced.
Now, less than 3 weeks before the foreclosure moratoriums were set to end, those consumers still don’t know what solutions might be available to them, or whether they will qualify for the programs. Right now the end date is set for March 13, but that could be extended if mortgage lenders are still unsure of the details of President Obama’s home loan relief plan.
In fact, Bank of America announced recently that it will not engage in any foreclosure sales until the details of the Homeowner Affordability and Stability Plan are released.
Bank of America officials stressed their desire to use any and all tools available to help borrowers with sufficient income and the desire to keep their homes.
Wells Fargo, Countrywide, and subsidiaries of Merrill Lynch have also extended their moratoriums on foreclosure, pending details of the plan.
An announcement by Obama last week indicated that a large part of his plan is aimed at homeowners who are in default or at risk of default.
While he stressed that the measure is not intended to bail out borrowers who have acted irresponsibly, he said that those who meet eligibility requirements could see a drop in monthly payments. It is possible that through a home-loan modification, up to 4 million borrowers could qualify to have their monthly payments lowered to 31% of their pre-tax income.
This reduction will likely come via a reduction in interest rates, with the Federal Government making up the difference between the mortgage lender’s stated rates and the rate the homeowner is able to pay.
In another part of the plan, homeowners whose mortgage loans are guaranteed by Fannie Mae or Freddie Mac may be able to refinance at a lower rate. Any loan up to 105% of the home’s current value will be eligible – not as a cash-out refinance, but as a refinance of a home that has lost value in today’s housing market.
Author: Mike Clover
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