How Obama mortgage modification plan may help

Posted on March 10, 2009. Filed under: Bailout, Housing, Legislation, Loan Modification, Mortgage Audit, Mortgage Law | Tags: , , , , , , , , , , |

Will the Obama administration’s loan modification plan be a tourniquet or a Band-Aid? The $75 billion program seeks to stop the nation’s foreclosure hemorrhage by making home loans more affordable for 3 million to 4 million at-risk homeowners. It sets up incentives for loan servicers to modify mortgages, a way for them to assess borrowers’ situations, and a structured relief plan with lower monthly payments for five years and then a step-up to the current interest rate.

Previous loan modification programs lowered payments only briefly and minimally. Eight months after modification, 58 percent of loans were delinquent again, according to a report from the comptroller of the currency. Housing advocates hope this plan will prove more viable. “For the first time, the modification piece provides a consistent sense of standards with some transparency and some strong incentives to lead to long-term, affordable loan modifications,” said Paul Leonard, director of the Center for Responsible Lending office in Oakland. The plan pays servicers $1,000 to implement a modification and $1,000 annually for up to three years if it’s successful. There’s an extra $1,500 bonus for modifications made while the borrowers are still current on their mortgages. “Is it enough? I certainly hope so,” Leonard said.

Sheri Powers, director of the homeownership center at the Unity Council in Oakland, said she thinks the plan will help the struggling homeowners she counsels. “Most of our clients, maybe 65 percent, will be OK with an interest rate reduction to between 3 percent and 4 percent,” she said. The plan says interest rates can go as low as 2 percent if needed to get payments down to 31 percent of a borrower’s income. Terry Moore, managing director of the North American banking practice for consulting giant Accenture, works with most of the biggest banks in America. From the lenders’ perspective, the plan is positive also, he said.

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One Response to “How Obama mortgage modification plan may help”

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Don’t know about you bleeding heart Socialist-I have enough on my plate feeding my family,making my mortgage payment ON TIME-my car payment -utilities- etc without having to help pay some slackers mortgage as well. Capitalism=hard work=be all you can be. Socialism= leveling the playing field=to the same level of misery.


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