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President Obama understands the toll that the economical crisis has had on those who are homeowners. Many neighborhoods unfortunately now boast several foreclosure signs. Each foreclosure can also affect the price of the other neighborhood homes by up to 9% of their valuation. In some cases, this has caused the payoff on the current home loan to be more than the value of the home. The President's plan to modify home loans comes just in time to help this critical problem.
The plan was unveiled in February of this year. This plan to help homeowners will begin on March 4, 2009. Part of the home loan modification will give the owner with a looming foreclosure the opportunity to refinance the mortgage. Typically, refinancing usually requires at least 20% of the current mortgage paid before applying. Those who used to meet this standard are now unable to because of the decrease in the value of their homes. Now, rather then having their homes foreclosed upon, these people are given the special privilege to refinance even if they don't meet the standard qualification.
Part two of the President's plan is the modification of existing home loans. Experts suggest that anywhere from 4 to 5 million homeowners would be helped by modifying their current loan. Lenders are required to follow a Standard Waterfall which makes the process quicker and easier and allows customers to have the benefit of payments they can more easily afford. Money is given to the lenders who find homeowners who are at risk of losing their home to foreclosure and helping to reduce their payment due every month.
The home mortgages of at risk owners are changed to reflect their income by the financer. The interest rates are decreased until a payment is reached that will be 38% of the homeowner's gross income on a monthly basis. Each lender will receive money from the program that matches per dollar the continuing decrease in the interest rates.
Matching money will be available from the United States Treasury until the ration of payment to income reaches 31%. Because many people have been laid off or lost wages in other ways, they are currently paying anywhere from 40 to 50% of their income towards their house payment which will certainly cause financial strains on the household. Perhaps you are able to identify with this scenario and if so, you need to look into the loan modification plan before you lose your home.
Designed to be simple and easy, the Standard Waterfall, gives the lender all the guidelines necessary when reaching the terms of a loan modification. The rules are spelled out and must be followed so that the rate of foreclosures will drop. The old method used by lenders did not cover the monthly payment but simply would add the late payments to the loan. The modification plan by President Obama works to help the everyday citizen get the help they need by providing monthly payments that are affordable so that all people can continue to own their own home.
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