February 20th, 2009 9:58 AM

Recently, President Barack Obama announced a new U.S. government plan designed to help Americans who have fallen behind on their mortgage payments or are in imminent danger of missing a payment. The Homeowner Affordability and Stability Plan, includes both a modification program for at-risk borrowers and refinance initiative for Fannie Mae and Freddie Mac borrowers who are current on their mortgage payments.

The program is categorized into 3 parts and is a combination of refinancing those borrowers who are current but not able to refinance because of falling home prices, more aggressive modification program policies for those who need assistance and can’t afford their current loans but want to stay in their homes, and added assistance to keep long term interest rates low through building confidence in the GSE’s (Fannie Mae/Freddie Mac).

There is not a whole lot of credible detail out there about what specifically each of these items will do or how they will work, but I have attached 2 documents showing what information is available including FactSheet.pdf and a Consumer Q&A guide. Fannie and Freddie have both announced they will not have any further detail until March 4^th on implementation. (If you can not open these files, you may email me and I will send them to you.)

Homeowner Affordability and Stability Plan

1. Refinancing for Responsible Homeowners Suffering From Falling Home Prices

2. A Comprehensive $75 Billion Homeowner Stability Initiative which includes…

· A Loan Modification Plan To Reach 3 to 4 Million Homeowners

.  Shared Effort with Lenders to Reduce Interest Payments

. Incentives to Servicers and Borrowers

· Clear and Consistent Guidelines for Loan Modifications

· Required Participation By Financial Stability Plan Participants

· Modifications of Home Mortgages During Bankruptcy

· Strengthen Hope for Homeowners and Other FHA Loan Programs

· Support Local Communities and Help Displaced Renters

3. Support Low Mortgage Rates by Strengthening Confidence in Fannie Mae and Freddie Mac

Please understand, that interest rates in all of these models (except one) are still determined by the market, not forced or arbitrary amounts that are not sustainable and determined by the government. The one program included in the plan that discusses forced interest rate or principal reduction is the “Homeownership Stability Initiative” in which the borrower, lender, servicer and government share in the cost of the reduced rate and are incented on timely payments. Please read the entire initiative to see how expected plan will work.

Again, these are significant program changes that attempt to make a difference in stability to the housing crisis. But above all, the best way to accomplish that is through accurate information and consumer participation in the economy. Values are at all time lows, interest rates are at all time lows and loans are available for those who could not afford to qualify in the past. As we all have our own opinions on the crisis and what will or will not help us recover, it is important to base our opinions on fact and educate ourselves on how these changes will affect us in the future. I hope this information will provide you some understanding and is helpful.

 

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