Can You Benefit from a Foreclosure Bailout?

For millions of homeowners, the past few months (or years) have been very confusing and frustrating as multiple government ‘fixes’ have turned out to be both inaccessible and, in many cases, downright imaginary. With estimates that one in five homes has a mortgage that is underwater, it is important to remember that there are plenty of options to pursue before you walk away from your home. Then the government would kick in money to bring payments down to 31% of the homeowner’s income. It also gives servicers money for modifying loans, and additional funds if borrowers stay current or are helped before they fall behind. Even if you mislaid a zero somewhere, we’re still talking $160 per homeowner-couple, on average.

So, one wonders what type of homeowners the American taxpayer will be bailing out under Obama’s plan. Will he try to save only people in danger of losing a primary residence, or will he consider saving flippers part of the collateral cost of propping up the housing market? Why was the President under the illusion that his plan would rescue homeowners? Where did he get his intelligence?

Little is known about the plan to help homeowners. Early reports speculate that at least $50 billion from the bank bailout, or Troubled Asset Relief Program, will be used. It will help large numbers of homeowners. But when you see claims that millions and millions of borrowers will benefit, look out. Most homeowners want to know what it means for them, whether they are likely to qualify, and what they need to do to obtain relief. Although the eligibility requirements and other details are likely to become clearer in the next few weeks, you can glean some information from the Homeowner Affordability and Stability Plan.

Will housing really be shored up with President Barack Obama ’s expected plan to aid homeowners coupled with his signature yesterday of the $787 billion economic stimulus bill? One school of thought says it will. Lenders should take into mind the likelihood that homeowners can afford terms of the new loan and must follow an established process to reduce the monthly payment to no more than 31 percent of the borrowers’ gross monthly income. To do that lenders will first reduce the interest rate on the loan and then could extend the term of the loan to as many as 40 years.

But if I understand it correctly, it is only for those homeowners still current on their mortgage payments and still gainfully employed and maintaining a good credit score. This in reality is a preventive measure at best but does little to stem the current tidal wave of foreclosures. This program requires that a homeowner be able to show that they were a victim of financial hardship. This means that something over which you have no control has happened to lower your income or raise your expenses to make your housepayment impossible to manage. Homeowners fell behind on mortgage payments in record numbers during the first six months of 2009, according to industry firm RealtyTrac. A record 1.53 million properties were in the foreclosure process.

Tags: Affordability, American Taxpayer, Bank Bailout, Barack Obama, Borrowers, Collateral, Economic Stimulus Bill, Eligibility Requirements, Estimates, Flippers, Foreclosure Bailout, Homeowner Affordability and Stability Plan, Housing Market, Illusion, Intelligence, Large Numbers, Lenders, Loans, Mortgage, Obama's plan, School Of Thought, Signature, Troubled Asset Relief Program