Federal Government Mortgage and Foreclosure Help
This new federal government program, which was created to provide mortgage and foreclosure help to millions of homeowners across the country, is known as the Homeowner Stability Initiative and will provide $75 billion is assistance to homeowners. The program will work by modifying the mortgages of over 4 million homeowners across the nation. This mortgage assistance is offered at the federal government level and is in addition to any state government assistance plans. The Homeowner Stability Initiative should also be a major upgrade to the other federal government mortgage assistance plan, Hope for Homeowners.
If you or a family member is in the military, or a federal civilian employee, the government offers the Homeowners Assistance Program for mortgage and foreclosure assistance.
This assistance will help a wide variety of homeowners. For example, even mortgages that are "underwater" can be helped. “Underwater” means that what homeowners owe on their home is now more than what their home is worth. Historically these homeowners have tremendous difficulty refinancing their mortgage and receiving mortgage help because they don't meet lenders' "loan to value" ratio (LTV).
Another criteria for this program. Homeowners who are behind on their payments and those who are at an immediate risk of foreclosure are not the ones for whom this assistance program was created. Rather, the primary mission of this program is to help homeowners who have not missed numerous payments. For example, if you are struggling to make your monthly payments but are current on your mortgage, you are a good bet to receive mortgage help from this federal government mortgage assistance program. The primary reason being that banks can modify your loan with a very high degree of confidence that you will continue to pay your mortgage and that you will not immediately default.
In addition, as another what some will call benefit, many families will be able to receive special debt and financial counseling to help get their budget and financial situation in order.
Mortgage and foreclosure help is provided in three main phases, and the mortgage modification process is:
- The banks and lenders need to reduce the interest rate to a low, clearly specified level so that the mortgage payment is less than 38 percent of the household total income. This lower monthly payment will help the borrower stay current on the mortgage.
- Next, the federal government needs to match further reductions in interest payments "dollar for dollar". What is happening here is that the government is paying the lender additional funds to further lower the mortgage interest rate down until it is only 31 percent of the borrower's total household income.
- Last, but not least, these new, lower mortgage interest rates rates are kept in place for at least five years. After that timeframe, the interest rate is slowly, but gradually increased to the current market rate.
- Another option to provide further mortgage assistance is that the banks and lenders can also agree to reduce the amount of the principal owed by the borrower and the government will reimburse the lender for a partial share of these lower principal costs.