The Associated Press has posted an article that discusses the Obama administration’s newly unveiled plan to help some homeowners who are having financial difficulty by reducing the amount owed on their mortgages. The $14 billion in funding comes from the $75 billion already set aside for foreclosure prevention programs, although, some think that the government is taking on too much of a risk by taking on bad loans.
The multifaceted effort will allow people who owe more on their mortgages than their properties are worth to get new loans backed by the Federal Housing Administration, a government agency that insures home loans against default.
The plan will “enable the borrowers’ existing mortgage companies to receive incentives to lower their principal balances.” To qualify for refinancing under the FHA program, homeowners must not have fallen behind on mortgage payments even if they’re paying more than their home is worth. Also, monthly payments for unemployed homeowners would be reduced for six months.
The goal isn’t to stop all foreclosures or help all troubled homeowners. Instead, the goal is to help 3-4 million homeowners who are struggling. However, it’s estimated that 1-1.5 million (in addition) avoid foreclosure, compared to the 4.5 million people who are already in foreclosure proceedings or are 90 days late on payments.
The plan won’t assist investors and speculators or “Americans living in million dollar homes or defaulters on vacation homes,” an administration fact sheet said.
Some homeowners will not be able to afford to stay in their homes because they bought more than they could afford, officials said.
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