The US government recently announced a scheme, that is essentially a mortgage repayment reduction plan, that will make it easier for many people to be able to afford to repay their mortgages.
The scheme will make it possible, for those who qualify, to considerably reduce their mortgage repayments. It is aimed at people who have little or no equity in their homes, and who are at least 90 days in arrears, but it only applies to loans guaranteed or owned by Fannie Mae and Freddie Mac, or other participating loan companies.
Critics of the scheme, suggest that it is likely to encourage people to get behind with their payments deliberately, so that they can qualify for advantageous terms. Others suggest that those who have ensured that they can afford their mortgages are being lumbered with tax hikes to assist those who have not been so prudent. However, it is not really that straightforward, and even President Elect, Barack Obama, has suggested that millions of Americans have been victims of predatory lending.
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Successful applicants will be able to get their mortgage repayments, including significant related expenses, reduced to 38% of their gross income. This could be achieved by reducing the interest rate, or by extending the loan period up to 40 years, or by reducing the principal against which the loan interest is charged. In the latter case the amount by which the principal had been decreased would be added back when the property was resold or refinanced.
Reduced interest rates would be available for a period of five years at rates down to, but not below 3%, after which they would revert back to market rates. On expiry of the term agreed under the scheme, there would no adjustment, to claw back the difference between the concessionary and market rates.
Obviously this is not a plan that will help everybody, but many people, who it could assist in staying in their homes, will welcome it. They would be well advised to seek full information regarding the scheme from their lender or government sources.
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There has already been a lot of hardship associated with the credit crunch, but it seems that the government is more than willing to play its part in alleviating financial problems, for homeowners.
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mortgage repayment reduction plan
mortgage repayment reduction plan
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