The Money Mentor: Can President Obama Save Homeowners from Foreclosure?

3 Nov

By:  Lorillia Brown-Phillips, Your Black World, The Money Mentor

Last week President Obama announced in Las Vegas (which has become one of the hardest hit areas to be affected by this mortgage crisis) that the government will be providing relief to homeowners who are underwater on their home mortgage loans.   The new rules that have been put forth to provide relief only apply to homeowners who are current on their mortgage payments and are seeking to refinance out of their high rate mortgages to lower rate loans.   According to treasury.gov, which oversees the Making Home Affordable program, the government wants to provide economic relief to homeowners through refinances which will reduce the likelihood of default and boost consumer spending.

What type of homeowner qualifies for relief?    Homeowners who have a government owned or backed mortgage loan by Freddie Mac and Fannie Mae.  The homeowner has to be current on the mortgage home loan, not missed a payment in the last six months and not had more than one late payment in the past year.   The new plan will require constant monitoring by the administration and midcourse corrections, should the rules for homeowners turn out to be overly restrictive or the banks pad up the new loans with excessive bank fees.

What about homeowners who do not have a Freddie Mac or Fannie Mae owned or backed loan?  According to the Making Home Affordable.gov website, there is relief for homeowners who have conventional, FHA, VA and USDA loans.  If you do not know what type of loan you have, the website will provide guidance to help you learn about your mortgage relief needs.  Examples of the additional mortgage relief programs are, the Principle Reduction Alternatives (PRA), FHA-Home Affordable Modification Program (FHA-HAMP), and others will address the needs of homeowners who do not have Freddie Mac and Fannie Mae loans.

Will this new mortgage relief legislation prevent or eliminate the rise of foreclosures?   Reports have shown that real recovery, in the housing market and in the economy, will require reducing the principal balance on many underwater loans.  By taking the recourse of providing mortgage relief to homeowners this measure will reduce defaults and foreclosures by restoring equity to borrowers along with lowering their mortgage payments.

About the Author:

Lorillia Brown-Phillips is a Financial Advisor and Author of “Jump Start Your Credit: How to Negotiate and Settled Your Debts in 10 Steps”, she can be reached at admin@brownassocllc.com or www.brownassocllc.com

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