WASHINGTON – The Obama administration on Friday announced a major reworking of its troubled $75 billion plan to prevent foreclosures. The revamped program is designed to aid people who owe more on their mortgages than their homes are worth.
Here’s a look at the details:
Q.How many homeowners will this help?
A.The effort is designed to enable the government to reach its original goal of helping 3 million to 4 million homeowners avoid foreclosure by the end of 2012. That benchmark has so far proved impossible to approach. Only 170,000 homeowners have completed loan modifications, out of 1.1 million who began the government’s Home Affordable Modification Program since it started last year.
Q.How does the new plan work?
A.Borrowers will get help in three ways: Jobless homeowners can get a three- to six-month break on their mortgage payments. Banks will get financial incentives to reduce mortgage balances for “underwater” borrowers who owe more than their homes are worth. And lenders can offer refinanced loans backed by the Federal Housing Administration to these borrowers.
Q.When will all these programs be available?
A.Government officials didn’t specify but said they should become available in the coming months.
Q.I’m unemployed. How do I get help?
A.That piece of the program is designed to give homeowners more time to find a job. Borrowers will have three to six months in which they’ll have to spend no more than 31 percent of their monthly income on their mortgages. If you do find a job during that time, you will be evaluated for a loan modification that could permanently reduce your payments. To qualify, you need to live in your home, have a mortgage of below $729,750 and receive unemployment benefits.
Q.What happens if I don’t get a job after the time is up?
A.Lenders will encourage you to consider a short sale, in which you sell your home for less than the mortgage amount. Another option is a deed-in-lieu of foreclosure, in which you agree to hand back the property to your lender.
Q.I owe more on my mortgage than my house is worth. Will this help me?
A.Maybe. The program depends on the willingness of mortgage companies to participate. Their track record has been shaky at best.
Q.How do I qualify?
A.You must have a mortgage of less than $729,750. You also must show that you are in financial trouble. And you have to be spending at least 31 percent of your pretax income on your mortgage payment.
Q.So how do I apply?
A.Call the company that sends your mortgage bill, also known as your mortgage servicer, to see if you qualify. If you can’t get hold of someone, try a nonprofit housing counselor. NeighborWorks America runs a national network of foreclosure counseling agencies. Try: www.findafore closurecounselor.org/.
Q.How does the refinancing program work?
A.Some borrowers will be able to refinance into loans backed by the Federal Housing Administration, which insures loans against default. The FHA will get $14 billion in incentive money from the federal bailout fund to make this happen. Lenders will have to reduce the homeowners’ primary mortgages by at least 10 percent.
Q.How do I qualify?
A.Homeowners must not have missed any payments on their home loans, must live in their home as a primary residence and must provide proof of income.