President Obama Offers Help for Foreclosures

America’s financial climate has become tempered with panic and fear. Many Americans facing the harsh realities of a weakened economy, high unemployment rates, and the ever growing home foreclosures are looking to the government for help. In the midst of the turmoil the question is; Does President Obama have a plan for America’s current financial situation? The current standards that regulate foreclosures and the gravity of the situation we are in have severely limited the options to the road to recovery. In order to stop the ever surmounting number of foreclosures, what tactics does the President intend to employ? In his own words, the President speaks out on his plans to reign in the crumbling housing market.

“First, we will make it possible for an estimated four to five million currently ineligible homeowners who receive their mortgages through Fannie Mae or Freddie Mac to refinance their mortgages at lower rates,” said President Barack Obama while announcing his plan for waning the foreclosure rates.

Refinancing will lower interest rates for those who have their mortgages funded through Freddie Mac and Fannie Mae. This will assist those who hold mortgages on property that is worth less than the amount owed. This can be problematic for two reasons. First nobody wants to pay more for something than it is worth, it’s a loss. Second, holding equity in real estate is supposed to be the primary method of building wealth and security. In the event of loss of income or the need to liquidate assets, property owners who owe more than what they are worth are stuck without viable financial options.

“It turns out you can’t modify that mortgage if you’re in bankruptcy,” said the President. “Now that makes no sense. What that’s doing is, it’s forcing a lot of people into foreclosure who potentially would be better off, and the bank would be better off and the community would be better off, if they’re at least making some payments.”

So what options does this put us at, more government regulation? President Obama has been advocating the legislation that authorizes bankruptcy judges the ability to reduce mortgage payments.

Can this help? In one way it could assist those in bankruptcy from losing their homes, provide some funds to the banks that would have subsequently received nothing, and curve the rate of foreclosures that seemingly breeds a state of panic.

In response lenders will most likely tighten up mortgage lending due to the fact that they do not want to enter agreements that can be reversed at a later date. This has its benefits too. It is going to increase awareness of risk that should help prevent further irresponsible lending which will cause banks to crack down on irresponsible borrowing.

The options for refinancing are not available to everyone. There are several programs being implemented and only if the qualifications are met can assistance be offered. If you are finding yourself in financial turmoil with your mortgage, one of these programs may have been designed for you.

Hope for Homeowners Program H4H was enacted by congress during the Bush administration to help Americans refinance high rate mortgages that are at risk of going into default or foreclosure. Through this program homeowners can refinance their mortgages and related debts into a new FHA loan up to 90% of the appraised value of the home. The lender will then be required to decrease the loan amount by excusing a portion of your debt in exchange for future home value. The loan is a 30 year fixed rate mortgage that is insured by the FHA The program window is between October 1, 2008 and September 30, 2011. This program is open to those who are current on their mortgage, behind on their mortgage and in some instances those who have filed bankruptcy or have been foreclosed upon can still apply depending on the party handling their case and at what stage the foreclosure is.

Homeowner Affordability and Stability Plan HASP was passed for those homeowners who may or may not be behind on their mortgage, but have not gone into foreclosure. The program provides eligible borrowers the ability to refinance into a 15 or 30 year fixed rate loan. Lenders are not required to participate; however, the government is offering incentives to financial institutions for participating. To be eligible for this program the mortgage has to be on a property that the borrower is residing in and they have to owe less than 105% of their homes value. The modification is cost free, and homeowners should be weary of anyone insisting there is a fee attached. Even if you are scheduled to go into foreclosure, contact your lender because various organizations have showed interest in postponing foreclosures in order to receive the benefits available to them under the HASP.

The President’s plan for helping Americans avoid foreclosure is one part of an entire economic recovery plan. While increasing employment rates are another key step, President Obama has explained the housing crisis as an integral part of America’s financial recovery.

"We must stem the spread of foreclosures and falling home values for all Americans, and do everything we can to help responsible homeowners stay in their homes," he said as he signed the American Recovery and Reinvestment Act into law.

In the end, President Obama will not be able to hep everyone. Responsible borrowers and those that have been maintaining open dialog with their lenders to prevent default are most likely going to benefit. Those who do feel the effects of the Presidents plan will help offset the current financial struggles facing America today.