Difficult Mortgage Payment? President Obama's New Program Helps Millions

The United States is going through one of the worst economic periods in history. Unemployment rates are skyrocketing, home values are plummeting, personal incomes are slumping and home foreclosure rates are through the roof. Millions of responsible homeowners are having difficulty with their monthly mortgage payments and are at risk of foreclosure. However amongst the gloom and despair there is hope. Economists and politicians alike have realized that one of the biggest keys to turning around the US economy will be to support housing prices. In order to support housing prices, steps were needed to help homeowners avoid foreclosure and stay in their homes. In order to do this, mortgages would need to be refinanced or restructured to lower monthly mortgage payments to the point where troubled homeowners could afford them.

In recent weeks, President Obama and his administration have designed and implemented a number of programs that are intended to help responsible homeowners to lower their monthly mortgage payments and avoid home foreclosure. The largest and most significant program to be implemented is the new Making Home Affordable program. This program has two main components. The first component is the Making Home Affordable refinance program. The second part of the program is the Making Home Affordable loan modification program. The two components target homeowners in different situations in an attempt to help as many responsible homeowners as possible. It is estimated that up to 9 million homeowners across the United States will be helped by this program.

Making Home Affordable Refinance Program

The first part of the program is the mortgage refinance plan. There are four main qualifications to determine who may be eligible for this program. First, the home loan to be refinanced must be homeowner's primary residence. Second, the homeowner must be current on their mortgage. Being current means that the homeowner has not been more than 30 days late on their mortgage payment over the past 12 months. Third, the loans to be refinanced must be held by Fannie Mae or Freddie Mac. Finally, the amount owed on the mortgage must be approximately the same amount or less than the current home value.

If the homeowner passes these four qualifications, then they may be eligible for the refinance program. The refinance program will lower interest rates for most homeowners by placing them in a 15 year or 30 year fixed rate mortgage. This will not only lower monthly payment for most homeowners, it will also provide for a fixed monthly payment for the life of the loan. This will greatly assist those homeowners who are currently in an adjustable rate mortgage, as well as homeowners currently in an interest only loan. So this program really targets long term viability and stability for homeowners. For homeowners who do not qualify under this program, the second part of the program may be an option.

Making Home Affordable Loan Modification Program

The second part of the Making Home Affordable program is the mortgage loan modification program. There are again four main qualifications to determine if the homeowner will be eligible for a loan modification. First, the home must be the homeowner's primary residence. Second, the amount owed on the mortgage must be less than $729,750. Third, the homeowner must be having difficulty paying their mortgage due to a significant increase in monthly payments, a significant reduction in income, or a significant financial hardship. Finally, the mortgage must have been received prior to January 2009.

Homeowners who pass these qualifications may be eligible for the loan modification program. What this program will aim to do is lower the monthly mortgage payments by either reducing the interest rate on the loan or by reducing the principal amount of the loan. The aim is to have the total monthly mortgage payments, including taxes and insurance, to be equal to 31% of their monthly income. This will be done primarily from the reduction of interest rates down to as low as 2%, but may also include lengthening the terms of the mortgage or even forbearing principal at no interest. The interest rates will be set for five years, as which point there may be an increase until the rate reaches a set interest rate cap. So the program will create immediate relief for homeowners and will also have long term stability and viability measures built in.

So as you can see, there is hope for homeowners across the US. President Obama and his administration are working diligently to help homeowners avoid foreclosure and save their homes. By taking these measures, the White House is aiming to support our economy and help protect individuals and families across the nation. The Making Home Affordable program will not help everyone in need, but it is a major step in the right direction for our country.