Government Housing Rescue Plan Started Wednesday
On Wednesday, amidst all the hoopla surrounding the $700 billion bailout package, the housing rescue plan the government approved weeks ago was quietly launched. However, reports CNN Money, things aren’t likely to take off anytime soon:
Banks, however, didn’t receive the program’s details from the FHA until Wednesday, and say it will likely be weeks before they can offer it to their customers.
Even then, lenders probably won’t rush to participate in the program, which is voluntary, since it requires them to take a pretty significant losses on the loan principal in most cases. Instead, banks have said that they’d prefer to use their own mortgage modification programs where they can better control the terms.
The voluntary nature of the program is what makes this avoidable for many mortgage lenders, and many of them are probably waiting to see what happens in the House today with the bailout bill. Here are some of the details regarding eligibility for the government’s housing rescue program:
- Mortgages must have been taken before January 1, 2008.
- Borrowers must have made at least six payments.
- The debt to income ration must be at least 31%.
- Borrowers must not have intentionally missed payments.
- The borrower must live in the house in question.
- The borrower must have submitted accurate information on the mortgage loan documents.
Those who meet these requirements can expect the following help from the housing rescue plan:
- A 30-year fixed mortgage loan ($550,440).
- New appraisal.
- Loan for no more than 90% of the home’s value.
- Release from second home mortgages.
- Release from prepayment penalties.
However, it is important to note that borrowers who take advantage of this housing rescue plan must share their equity with the government, and they must pay 3% of the home mortgage loan value upfront.
It sounds like a lot of requirements, designed to protect the taxpayers and the government, but the terms may be too onerous for mortgage lenders (and even borrowers) to want to commit to.
Tags: housing rescue plan, debt to income ratio, home mortgage loan, mortgages,
second mortgage, $700 billion bailout, government housing plan
October 8th, 2008 at 3:24 pm
[…] your neighborhood is lined with homes for sale due to foreclosure you may start to wonder if there is more to going into foreclosure than not paying your monthly […]