Mar 4, 2009 7:00 pm US/Central
Could The Federal Housing Rescue Plan Help You?
ST. PAUL (WCCO) ―
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Homeowners in Minnesota are anxious to know if they'll qualify for the help. (File)
CBS
The Obama Administration released details of the government's $75 billion homeowner rescue plan. The main goal of the package is to curb the mounting number of home foreclosures and to help millions of others refinance their mortgages at today's low rates.
Homeowners in Minnesota are anxious to know if they'll qualify for the help. Hundreds of phone calls are pouring into the Minnesota Home Ownership Center in St. Paul, a statewide clearinghouse for the many agencies that provide foreclosure and mortgage counseling.
According to the Julie Gugin, center's executive director, everyone wants to know one thing: "Does this apply to me, how do I find out more information?"
The "Making Home Affordable" plan is aimed at helping two groups of homeowners: The estimated 3 to 4 million facing foreclosure and the slightly larger group of 4 to 5 million American homeowners who are prevented from refinancing into lower fixed-rate mortgages.
For the most distressed homeowners, their loans will actually be modified by their lenders. Banks, with the help of the U.S. Treasury, will limit the homeowner's monthly house payments to 31 percent of gross income.
Here's an example of how that works:
For somebody earning a salary of $50,000 a year, the plan would cap your maximum mortgage payment at $1291 per month.
To reduce the payment to that level, the loan's interest rate will be lowered in one-eighth increments, to as low as 2 percent. If that modification alone doesn't get the monthly payment to 31 percent, the term of the mortgage loan can be extended to as long as 40 years.
In order to qualify for the mortgage modification program, a homeowner's financial situation will have to be verified. Income tax and pay stubs will be used to prove need and the borrower will have to sign an affidavit of "financial hardship."
"The goal is to look at people who are in housing crisis, in payment crisis or about to be in payment crisis and get their payments to the point where they're affordability. And that will provide incentive to that homeowner to stay in their home," said Gugin.
The second groups of homeowners who will benefit by the program are those who are current in their payments but have lost serious equity in their homes. Falling property values have eroded their minimum 20 percent equity which is required to keep the loan-to-value (LTV) ratio at no greater than 80 percent.
Mortgages backed by Fannie Mae or Freddie Mac can now be refinanced at today's low rates, even if they exceed the lender's maximum 80 percent loan to value ratio. Homeowners will need to contact the servicer of their mortgage to see if it is backed by Fannie or Freddie. Such mortgages will be eligible for the refinancing option so long as the loan to value does not exceed 105 percent.
Homeowners interested in learning more details on the two programs should contact their lenders. Additional information is also available online at the links below.
FinancialStability.org
Minnesota Home Ownership Center
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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