Monday, March 16, 2009

Obama’s Housing Plan

Photo by DJ XAVIOR on Flickr.

The economy is in shambles, the housing market has took a nosedive, the stock market decided to skydive from 14,000 feet, the retail sector is collapsing, people are losing their jobs to the tune of 600,000 per month, retirement accounts have tanked by 40% or more, ensuring people will have to work much longer than they ever intended to and oh yeah, we’re still fighting two wars on the other side of the world.

Given the current state of the union, I have to commend president Obama for marching into office and hitting the ground running. Within a matter of weeks, he had an economic stimulus bill waiting for his signature and now he’s taken a second approach by offering a housing plan that could help to stabilize the housing market, which is the biggest contributor to the economy becoming Swiss cheese.

There are a wide variety of options for troubled homeowners in the housing plan. While it doesn’t address every single scenario, the main point to extract is that if you are a homeowner in good standing with your mortgage lender and you are having problems paying your monthly payment, due to a shrunken income or to increased monthly payment due to a rate reset, then the federal government will work with the lender to modify your loan. The loan modification will work to adjust your monthly payment to a maximum of 31% of your gross monthly income. There are, however, many rules and restrictions to the housing plan. For instance, you must prove that you will be able to pay the new monthly payment, given your current salary. And if you have unfortunately recently lost your job, there isn’t a whole lot in this plan to help you. You also must live in the residence in question; this bill is not intended to help investors. Additionally, your mortgage can not exceed Fannie Mae or Freddie Mac loan limits, which are $417,000 in most areas and up to $729,750 in higher cost areas, like New York and California. So be sure to read the details carefully and if you still have questions about whether or not you are qualified to take advantage of the housing plan, then you could always contact your mortgage provider.

Obama Housing Plan: What You Need to Know [NY Times]
Q. and A.: Obama’s Housing Rescue Plan and You [NY Times]

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