Here is a very good explanation of the new aid program to homeowner that will not be able to make their payments if they are in an adjustable mortgage that is due to reset.
The Bush administration plans to aid as many as 1.2 million homeowners facing the prospect of foreclosure, questions arose quickly. Here are the answers to some of the key ones.
· Which adjustable-rate mortgages are affected? To qualify to have their interest rate frozen for five years, homeowners must have received a loan sometime between Jan. 1, 2005, and July 31, 2007, and be facing a reset of their interest rate sometime between Jan. 1, 2008, and July 31, 2010.
· Who qualifies for this deal? Homeowners who haven’t missed a payment, but who might if their mortgage resets. Those who can't afford the higher payments, and who have credit scores below 660 and less than 3 percent equity in their homes, will get the biggest break from the lenders. People who are financially secure enough to pay the higher mortgage payments don’t qualify.
· Do owners of second homes or investors qualify? No. The plan excludes people who don’t live in the property that's facing foreclosure.
· Why didn’t the plan go further? If homeowners are going to pay less on their mortgages than investors expected, then people are going to lose money. Not all of those people are fat cats. Potential losers include pension funds for teachers, firemen, police and an array of mutual funds whose clients are individual investors.
Source: BusinessWeek Online
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