The day after President Obama signed the American Recovery and Reinvestment Act he announced his plans for a new housing stabilization program that could assist as many as 9 million to keep their homes and refinance at lower rates. The Homeowner Affordability and Stability Plan is scheduled to go into effect in early March. It consists of three key sections and is aimed at helping those who have “played by the rules and acted responsibly,” but are stuck in high interest mortgage or at risk of foreclosure.
Here’s a short break down of the program’s three main components as stated in the Executive Summary from the U.S. Department of Treasury (found on www.treas.gov):
1.) Refinancing for up to 4 to 5 million responsible homeowners to make their mortgages more affordable.
2.) A $75 billion homeowner stability initiative to reach up to 3 to 4 million at-risk homeowners.
3.) Supporting low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac.
The first part will make low-cost refis more accessible to those hit by declining home prices, possibly cutting mortgages payments by thousands of dollars annually. It would apply to borrowers with “conforming loans owned or guaranteed by Fannie Mae or Freddie Mac.”
The second part has several sub-sections, but the gist of it is for lenders and government to share the expense of lowering monthly mortgage payments to no more than 31% of a homeowner’s after-tax income. This applies to those whose loan costs have well exceeded their monthly income. Lenders would receive incentives to work with struggling homeowners and the aid would not be offered to “speculators or house flippers.”
The third part will use money allocated by Congress in 2008 to boost financial aid for government-backed loans through Fannie Mae and Freddie Mac. This would allow for increased accessibility of affordable mortgages. The Treasury would pump more funds into select government entities (e.g. Preferred Stock Purchase Agreements) to bolster “stability and liquidity” in the lending markets.
To receive a full copy of the executive summary or to talk with a professional agent about how the new housing stabilization plan could benefit you, call (312) 268-8000.