Foreclosure Prevention Program of Obama

The administration of President Barrack Obama released a program called Foreclosure Prevention Program. It stands to help millions of struggling Americans on mortgage. Thereby, they get to keep the homes at times of especially tough economic conditions.

The economic recession claims the loss of millions of jobs. It is one of the major contributing factors. The employers cut the number of employees to save costs. Many companies also went to bankruptcy.

Also, the mortgage rate at one time went high. Consequently, the home owners were unable to pay the monthly mortgage payment. The mortgage calculators are a great tool. It allows the home owners calculate the mortgage payment between the possible lowest and highest interest rate. Hence, the home owners evaluate the affordability.

Many home owners also are paying mortgage more than the value of the home. The market value of the home took a dive due to the economic recession. The home sales had risen. However, it comes with a price. The home values and interest rate went down too. The interest only mortgage is great if the interest rate is going down. Then, the home owner sells the home at a greater price. With the current economic condition, it is difficult to gauge the rise of home market values.

The program costs $75 billion. And, the administration intends to buy $400 billion of Fannie Mae and Freddie Mae ($200 billion each). The program tries to help about 9 million home owners to obtain an affordable mortgage. And, the program takes in effect until the end of 2012. Also, the home owners can adjust the mortgage for only once.

The program aims to lower the mortgage payment of the home owners down to thirty one percent of the gross monthly income. This applies to home owners who defaults the mortgage payments. Usually, the home owners pay monthly or bi-weekly mortgage payments.

There is also a program for home owners who pay mortgage payments without defaults on the payment. The program allows for loan modification. It allows to mortgage refinance to lower cost loans. It applies for home owners with little or without home equity too.

In order to quality, the home owner must have the following.
- Acquired the mortgage before January 1, 2009.
- Primary mortgage less than $729,500
- Fully document income by tax returns and pay stubs
- Receives counselling on household debt (credit cards, auto loans, and alimony is over fifty five percent of gross monthly income)
- Sign a statement of hardship

As long as the interest rate stays above two percent, the servicers follow the detail plan to lower the total home payments to thirty eight percent. Then, the administration subsidizes the mortgage to lower the total home payments to thirty one percent.

The new interest rate of mortgage refinance stays for five years. After five years, the interest rate goes up by one percent. The rate goes up until the original rate or prevailing mortgage rate at the time of mortgage refinance.

The servicers receive $1,000 for each mortgage refinance. And, the servicers can potentially receive additional bonus if the home owners manage to keep up with the mortgage payments. Secondly, the mortgage investor get one time $1,500 for mortgage refinance of mortgage which is not delinquent yet. Finally, the home owners who keep up with the mortgage payment annually get $1,000 reduction on principal.

The program is excellent. The program benefits the servicers, mortgage investor, and home owners. In the coming weeks, the administration looks to expand the Foreclosure Prevention Program.