- By Kevin Yu
The Obama administration provided the details on Wednesday for its program to help homeowners. They said that the program, which is called the Making Home Affordable initiative, will be available soon and will help home owners to get reductions in their mortgage payments.
So how does the problem help the home owners?
First, a mortgage lender or mortgage-servicing company would first receive cash incentives to modify a borrowers’ loan so that the monthly housing payment declines to no more than 38 percent of the family’s gross monthly income.
The reduced payments could come in the form of a lower interest rate, longer mortgage term or a reduction in the principal outstanding loan amount.
If the lender decided not to offer the modification, such as in the case of a borrower who had become unemployed and whose income had largely disappeared, it would be required to examine alternatives to foreclosure before seizing the house.
Among the alternatives mentioned are “short sales,” in which the house is sold for less than the outstanding mortgage amount but the borrower is not held accountable for the balance; and a “deed in lieu of foreclosure,” which allows homeowners to avoid foreclosure by voluntarily surrendering their property.
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