His house
To anyone who has lived under a giant rock for the past couple years; the housing market has taken a serious nose dive. Those people who bought homes during the peak are now struggling to keep their head above water now that they owe way more than their homes are worth. Foreclosure is the dragon that is terrorizing the villages that is U.S. home owners. President Obama is playing the white knight, by coming in and enacting plans to slow down the dragon and keep people in their homes.
The Obama administration is working with the FHA (Federal Housing Administration) to bring down borrower’s monthly payments on their FHA insured mortgages. The long term goal is to get people to stay in their homes and keep making payments until the housing market picks back up. The plan hopes to actually save the government money by stopping people from walking away from their home loan and leaving the FHA with the bill.
The FHA will enable servicers to knock off principal from the loan in order to bring down monthly payments for borrowers to something that they can afford. As much as 30% of the principal can be chopped away from these loans to meet the affordability level. However, this 30% does not merely vanish, if the borrower sells the home or refinances, they will be responsible for the entire loan amount.
The Obama administration hopes to quell the market by putting in place a government program to give incentives to mortgage servicers as much as $1,250 for each loan modification completed. It is yet to be seen the reaction from the servicers of the loans or the borrowers on how they will receive this new plan.
[Opinion] While the plan is a step in the right direction by hold people accountable for at least some of their debt, it doesn’t completely solve the problem. Because of this new plan we will be seeing higher interest rates for home buyers in the years to come. People who are responsible and worthy of acquiring a home loan will be punished because of the actions of irresponsible people. Also, be looking for a faulty spike in real estate prices when people who take part in this program try to sell their house but need to make up for the remaining home loan amount.
~By Brandon Fenstermaker~
Hi, Not sure that this is true:), but thanks for a post.
Thanks
The source of the article: Wall street journal online http://online.wsj.com/article/SB124891434984092191.html
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