The U.S. Federal Government is changing its involvement in the U.S. Housing and Mortgage Crisis in 2009 with the Obama Housing Plan. Obama's Housing Recovery Plan seeks to put $75 Billion in aid into the Housing Crisis.
One part of the plan provides a way for those homeowners who have not gone delinquent on their mortgage but have high risk loans like adjustable rate mortgages and interest only mortgages to refinance their current mortgage at current market interest rates. Getting a loan modification at a lower interest rate will help millions of home owners get lower monthly mortgage payments. This plan is to go into effect in March 2009.
Not Delinquent But Have An ARM or Interest Only Mortgage?
Let's not talk about the folks who are already delinquent on their mortgage as these folks already have credit problems and a lot of attention already streaming their way. Rather let's focus on those who have great credit, have been making their mortgage payments as agreed, but have a high risk mortgage such as an interest only or an adjustable rate.
These homeowners are sitting on a mortgage time bomb - will the housing market rebound in time to allow them to refinance (home values go up enough to exceed mortgage balances) or will they face an adjusting mortgage payment.
Loan Modification Has Been The Only Option To Lower Payments But To No Avail
For many homeowners who have high risk interest only and adjustable rate mortgages the loan modification process has been the only way to convert their current mortgage to a fixed rate mortgage. This is because the majority of these homeowners find themselves in mortgages with loan balances close to the value of their home or exceed the value of their home. With balances near or exceeding the home values refinancing has not been an option.
With this volatile situation brewing - waiting for the interest rate on the mortgage to adjust versus the return of the housing market to push house values up again allowing a refinance, many US homeowners are finding life to be stressful.
Do Not Try To Fake Your Financial Hardship
What makes this situation worse for many of these homeowners is that if they haven't suffered any type of hardship and are still current with their mortgage, they are finding it very difficult to get their mortgage company to approve a loan modification. The answer that many homeowners who are still current on their mortgage are getting from their mortgage companies is that there is nothing that can be done unless their mortgage is delinquent.
The catch 22 here is that if you don't suffer a financial hardship and you let your mortgage payments lag when you have the ability to pay, the mortgage company is not going to approve a loan modification request you. Essentially you are stuck until your loan adjusts and you can't make the payments anymore. Only then can you legitimately seek a loan modification.
Housing Recovery Plan - Mortgage Modification Help On The Way
As we have pointed out, if you are current on your mortgage, have a high risk interest only mortgage or an adjustable rate mortgage and can't refinance because home values in your neighborhood have dropped then you are essentially stuck with not out. That is until now with the Obama Housing Recovery Plan making provisions to encourage mortgage companies to begin working with non delinquent high risk loan customers to modify their loans.
Obama' plan lays out incentives to have mortgage companies and mortgage servicing companies work out loan modification programs for non delinquent high risk loan homeowners before payment trouble sets in.
Hopefully this plan will provide some positive direction for these bill paying homeowners to go to relieve the stress they feel with their mortgage time bomb. The proof is in the pudding as to whether the lenders and servicers will act fast enough and broad enough to provide any significant relief.
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