So, You Want to Benefit from the Foreclosure Prevention Plan

By Miranda Marquit

February 19th, 2009

Yesterday, to much fanfare, a new foreclosure prevention plan was unveiled. The plan, in addition to helping millions who made poor decisions, also has the potential to help those who made good choices with their homebuying. Some of the highlights of the plan include:

Refinancing for those who owe between 80% and 105% of their home’s value.
Incentives to convince mortgage lenders to agree to loan modifications.
A possibility that bankruptcy judges can alter terms of the loan.
Provide financial backing to Fannie and Freddie so they can facilitate these changes.

The idea is to help borrowers in trouble before they start missing payments and head into foreclosure. But how do you take advantage of the foreclosure prevention plan?

Qualifying for the foreclosure prevention plan

First of all, you can’t actually qualify until next month, when more of the details are set to be released. However, right now you can start preparing by determining whether you are more likely to qualify. Here is a basic checklist that can help you see if you qualify for the foreclosure prevention plan:

Home mortgage loan serviced or guaranteed by either Fannie Mae or Freddie Mac.
Are you in danger of foreclosure? Are you afraid that you will no longer be able to make payments?
Has your home value dropped so that you owe between 80% and 105% of your home, and you want a lower mortgage payment?

#1 is the only requirement needed for every situation. #2 and #3 sort of represent an and/or type situation. You will need to work this out through your mortgage lender, however. And this may prove to be the undoing of the plan. Mortgage lenders will have incentives to help out, but it won’t be mandatory (unless a bankruptcy judge with new authority gets involved).

If you are thinking of taking advantage of the foreclosure prevention plan, contact your mortgage lender, and get your financial information together. You might find that you have a chance to benefit from the latest economic stimulus measure.

What’s In This New Obama Foreclosure Plan? [Foreclosure] (consumerist.com)
Treasury to Step Up Purchase of Fannie and Freddie Stock (mymortgageinsider.com)
President announces a $275 billion plan to help struggling homeowners. (slate.com)

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