With the countries foreclosure crisis worsening, the Obama administration has been forced to create a new plan for the recovery of the housing market. As published in the Arizona Republic, officials from the Obama administration released plans for a new homeowner assistance program call the Home Affordable Modification Program.
Within the plan there are three major factors: aid for homeowners who are unemployed, principal balance reduction for homeowners with unaffordable mortgage payments and required help with refinancing distressed borrowers from mortgage companies.
For homeowners who have recently become unemployed, the Home Affordable Modification Program offers assistance by asking mortgage companies to reduce borrowers payment until the borrower can find work. The reduction amount would be the added into the principal balance of the loan and be required to be repaid.
Additionally, the program will offer aid to home-owners who owe more on their balance than their home is worth. The government would offer incentives for mortgage companies to reduce homeowners mortgage balances by up to 15% of the current market value of their home. The new, refinanced loan would be backed by the federal government.
With past homeowner assistance programs, the Obama administration has not offered many incentives to the mortgage companies for their aid in refinancing borrowers, with the new plan, theses companies with receive up twice as much money as an incentive for refinancing homeowners.
Although the Home Affordable Modification Program aims to help many homeowners. There is still strict qualifying criteria. According to the Arizona Republic,
Strict qualifying criteria, which include demonstrable financial hardship without a single missed mortgage payment, have limited the success of the program.
Of the roughly 1.1 million homeowners who have applied, only 170,000 have received modified loans. Just half of those borrowers are expected to keep their homes.
Despite the fact that the requirements to qualify are difficult, this new program will still help to stabilize the current housing market by decreasing the amount of foreclosures seen. With future modification to the Home Affordable Modification Program, even more homeowners will be able to qualify and benefit from federal assistance.
