FAQs about the New Mortgage Aid Plan

Earlier this month, the Obama administration released information about a new plan that is designed to help homeowners who find themselves in financial difficulty and cannot make their mortgage payments. We have posted several articles regarding this program as of late, but here are some simple and straightforward questions and answers that may help you make sense of this new program and what it does.

How many mortgage borrowers are in financial trouble?
Currently, there are about six million American homeowners who have missed two or more mortgage payments. According to experts in the industry, there could be between 10 and 12 million mortgage borrowers become the victims of foreclosure in just the next three years. There are even more homeowners right now that are “underwater” with their mortgage, meaning that they owe more on their homes than what their home is worth.

How many homeowners will the administration’s new plan actually help?
The current plan is designed to help between three and four million avoid foreclosure by the end of 2012. Although it seems impossible, officials are hopeful it will work out. More than 170,000 homeowners have already completed a loan modification to help them through their financial difficulties and more than one million homeowners have signed up for the federal government’s Home Affordable Modification Program (HAMP) since the beginning of 2009.

How will the new program work?
There are three ways in which troubled borrowers can receive financial help. Firstly, those homeowners who are unemployed may receive up to six months deferred payments on their mortgage loan. Secondly, banks and lenders will receive government money for reducing the principal balance on many home loans. Thirdly, lenders may offer refinanced loans to borrowers. These loans will be backed by the FHA for extra security.

When can I take advantage of this new program?
There is no specific date on which the new program will start, but officials in the Obama administration say it will be in the next few months.

What do I do if I am unemployed?
Jobless homeowners will be given more time to find a job and during that time, they will not be required to spend more than 31 percent of their income on their mortgage. If you find a job within that time period, your financial situation will be reevaluated and you may even qualify for a loan modification which could reduce your payments. The requirements insist that you have a mortgage less than $729,750, live in your home as your primary residence and also receive unemployment benefits. If you do not find a job in that time period, the bank may ask you to do a short sale or agree to a deed-in-lieu of foreclosure which allows you to simply hand the property back to your lender without a messy foreclosure process.