I remember a time when all the neighbors banded together to complain about the vacant, boarded house in their neighborhood. Now, I see neighborhoods where several of these properties exist on each street! And these neighborhoods are not just in urban areas; nice neighborhoods in the suburbs are having the same problem.
Economic conditions and declining real estate values have led to job loss or reduced pay for millions of responsible people who now struggle to make their mortgage payments. Unemployment and corporate cut-backs are expected to force as many as 6 million more families into foreclosure with millions more having trouble making ends meet.
This situation is expected to be temporary because as the prices of real estate decrease, the demand will increase, eventually leading to a new balance. However, until this does happen, many families will lose their homes to foreclosure and more vacant properties will force neighborhood values to decline further.
Vacant, boarded homes are an eyesore to neighborhoods; these properties are often neglected, lawns arent mowed, trash and debris accumulates and kids are attracted to what they think of as their club house or fort. In worse case scenarios, child predators find these empty houses convenient for committing unspeakable acts!
New President Brings New Hope
President Obama and his administration have launched several new programs in March of 2009. As many as 9 million homeowners should benefit from these programs which will make their mortgage payments more manageable. The Making Home Affordable Program was implemented to support a recovery in the housing market by reducing the number of foreclosures and assisting responsible homeowners who struggle to meet their mortgage obligation.
This program brings together government, mortgage holders, investors and homeowners to share the responsibility toward preventing more Americans from losing their homes.
A Home Affordable Refinance Program
This program will help up to 5 million homeowners refinance their homes and reduce their monthly mortgage payment by taking advantage of historically low interest rates. One of the requirements to qualify is that the amount owed on the home can be no more than 105% of its value. Though many responsible homeowners made down payments on their homes of 20%, and some paid additional principal payments, a number of people still have problems refinancing due to the drastic decline in market values. The programs implemented by the Obama Administration are expected to provide an opportunity for responsible homeowners, whose loans are guaranteed by Freddie Mac or Fannie May, to refinance through these institutions to make their payments more affordable.
New Home Affordable Modification Program
This $ 75 Billion program is intended to prevent foreclosures and to assist responsible homeowners who are struggling with their mortgage payments. The Treasury Department will work with federal agencies on this comprehensive, multi-part plan to help millions of people who are facing foreclosure.
The Home Affordable Modification Program is expected to help millions of homeowners who struggle to make their mortgage payments, but are unable to refinance due to declining real estate values. So many responsible homeowners have found themselves upside-down with their homes being worth far less than they owe on their mortgage. It is hoped that this program will provide security for families and stability for communities hardest hit by foreclosures.
The best part of this program is that all parties involved work together to share the cost of the modified mortgage. Lenders, investors, borrowers and the government cooperate with each other to achieve the ultimate goal to reduce foreclosures and avoid further downward pressure on home values.
The way it Works
The Treasury will work with lenders ad investors to make homeowners mortgage payments more manageable.
A mortgage modification will reduce monthly payments to an amount of no more than 38 percent of the homeowners income.
The Treasury shares in the cost to reduce the payment further, from 38% down to 31% of the borrowers income.
The modified payment amount will be effective for 5 years, and then the interest rate will gradually increase by 1% per year until it reaches the capped rate that is put in place at the time of modification.
In order to reduce the monthly mortgage payment, the lender can agree to an interest rate as low as 2% and/or a mortgage term extended to up to 40 years. If the monthly payment still does not reach the target amount, the principal can be reduced; this is a last resort.
Incentives for Lenders who Participate
A $ 1,000 reward is given to lenders/servicers for each eligible loan modification which meets the guidelines established under the new programs. In addition, they will receive $ 1,000 per year, for 3 years for each successful modification program.
Similar incentives will be offered to servicers and lenders who agree to modify or refinance FHA, VA or Agriculture Department loans, according to the new or similar programs that are in place.
Even more incentives are offered to lenders and mortgage holders who agree to a loan modification before ones payments become delinquent, because it has been found that the success rate of modifications is much better if the mortgage is current.
Hopefully, many homeowners will take advantage of one of these programs, to prevent foreclosure and to remain in their homes. If not, then we may be faced with neighborhoods with occupied homes being few and far between!
This article was written by David Smith, founder of U-Move-On, a service to help distressed mortgage borrowers decide the best solution to their foreclosure problem. David provides encouragement and support to help his customers deal with the foreclosure process and life after foreclosure. His unique service helps people decide if they should walk away or fight foreclosure with loan modification.
Orignal From: Facing Foreclosure? Loan Modification and Refinance Solutions
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