WASHINGTON – The Obama administration announced a major
reworking of its troubled $75 billion plan to prevent foreclosures
on Friday. The revamped program is now designed to aid jobless
homeowners and people who owe more on their mortgages than their
homes are worth. Here are the details:
Q. How many homeowners will this help?
A. The government aims 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.
Q. How many borrowers are in trouble?
A. About 6 million homeowners have missed at least two months of
payments. And experts warn that 10 million to 12 million borrowers
are in danger of foreclosure over the next three years. A growing
risk is among homeowners “underwater”: They owe more on their loans
than their homes are worth.
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. And lenders can offer refinanced loans backed
by the Federal Housing Administration to these borrowers. The
programs 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 does it work?
A. Mortgage companies that already participate in the
government’s foreclosure-prevention program will have to consider
reducing the mortgage amount for borrowers who owe at least 15
percent more than their home’s current value. Those reductions will
happen gradually over three years and apply only if you miss no
payments. The companies will get expanded incentives.
Q. What kind of incentives?
A. For every dollar of principal the lender reduces, they will
receive a subsidy of 10 to 21 cents. The larger subsidies will help
reduce principal of borrowers who are least underwater.
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. Try:
www.findaforeclosurecounselor.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.
Q. How do I apply for this?
A. You don’t. It’s voluntary for mortgage companies. They’ll
evaluate whether they want to offer this option to homeowners.
