New Program Modifies Mortgages to Help Stabilize the Real Estate Market

On Tuesday of this week the Bush administration unveiled a new program that will modify mortgages to help stabilize the real estate market.

Eligibility of the new plan is determined by several factors:  Homeowners must be 90 days or more late in their mortgage payments, owe at least 90% of their home’s current value, live in the home on which the mortgage was taken and have not filed for bankruptcy.

Under the plan, homeowner’s mortgage payments would be adjusted through lower interest rates or longer repayment schedules…in some cases up to 40 years.  The goal of the plan is to bring payments to 38% of monthly household income.

Currently the plan only applies to loans owned or guaranteed by Fannie and Freddie, however officials are hoping that it will soon be adopted industrywide.

Of the 18 million loans owned by Fannie and Freddie only 1.7% of them are delinquent by 90 days or more, this works out to be about 300,000 mortgages that could be eligible.

There is a strong interest from banks and mortgage finance firms to halt foreclosures because of the chain reaction they produce.  The market already has more homes for sale than there are qualified buyers and thus more foreclosures will drive down home prices further which will in turn lead to more foreclosures.  If you are behind on your mortgage loan it is strongly urged that you contact your lender as most are willing to setup some sort of plan to help with your payments and keep you in your home.

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