What do you think of Obama’s foreclosure bailout plan? Should there be help for homeowners? According to our government, here’s one more way of solving the U.S. financial crisis.
The Mortgage Bailout and Rescue Rubs Some People The Wrong Way
An interesting debate erupted (yes, just like a volcano) between CNBC’s vociferous Rick Santelli and the White House regarding the mortgage rescue. Rarely does a President bother to answer those who criticize him in the media, but in this case the response was humorous and coffee-laden. “Read the document before attacking it” was good advice for Santelli and anyone else. President Obama is of course referring to the Homeowner Affordability and Stability Plan, which outlines how the government will be bailing out homeowners in the coming months.
A typical Rick Santelli rant.
The Debate Behind Obama’s Homeowner Affordability and Stability Plan
Santelli asked a populist question: “Do we want to finance our neighbor who can’t pay his mortgage because he/she was careless and added an extra bathroom when he/she couldn’t afford it?”
But shouldn’t the real question be: “Do we want to add multiple layers of bureaucrats paid by our taxes to check on every troubled mortgage loan (that’s how we had it under Bush’s plan), or do we want to speed things up and address the 8 to 10 million mortgage owners whose imminent demise may sink this economy even further (that’s how we have it under Obama’s plan)?” No doubt, this plan will be under heavy debate for a while, and while we wait for the program to get executed, let’s check on some of the issues and questions homeowners are having with it.
Common Questions About The Mortgage Bailout and Rescue Plan
Many worried homeowners have been wondering: “What will this package do for me if I am barely holding on to my home?”
Here is one answer given by a couple of AP real estate writers:
To qualify, the house must be your primary residence, your mortgage payment must be greater than 31 percent of your monthly gross income and your loan mustn’t exceed current Fannie Mae and Freddie Mac loan limits, which vary by region and max out at nearly $729,750. This is for those who are behind in their payments or who are struggling to make payments.
More specifics exist out there for those interested in finding out how they will be impacted by this foreclosure bailout plan. Make sure you check out the rest of the details here.
Do You Qualify For Refinancing? Talk to Your Bank
With the Homeowner Plan in the works, you may be wondering whether there’s something here for you. As it stands, I’m understandably curious about the present market value of my home. Since I don’t want to pay a certified appraiser, I’ve gone to this website to check out the approximate value of houses on the market in my neighborhood. Now say you’ve decided to check out your home’s value this way and have discovered that you owe more than the value of your house, then in specialized terms, your mortgage is now “underwater”. Another term for this is “upside down mortgage“.
Can you breathe underwater? Not for very long, so the housing bill aims to rescue homeowners in this difficult predicament by allowing them to refinance their mortgages into acceptable monthly payments. Some banks are already doing this, so if you’re one of those facing this situation, check with your mortgage holder to see whether you qualify.
Caveat: To qualify, homeowners can’t owe more than 105 percent of their home’s current value on their first mortgage. For example, if your home is worth $100,000, your first mortgage can’t exceed $105,000. I don’t know what brilliant mind came up with that limitation, but it is sure to leave many people out.
Finally, the most promising measure for homeowners that is sought by the Obama administration allows judges to modify the terms of a troubled mortgage in the case of bankruptcy. Lenders are incensed, of course, but this would certainly allow many people to retain their homes while continuing to make reduced payments to the bank. If you’re so inclined, you may want to write your congressman (or congresswoman) to vote for the bill that supports the amendment of bankruptcy laws. But as it stands, the whole mortgage bailout plan has its vocal opponents (like Santini and countless Republicans), so it’ll be interesting to see just how things do pan out in the future.