Housing Stability
The second portion of the plan is designed to provide relief to homeowners whose loan payments have risen to 40 or even 50 percent of their monthly income. The plan's goal is to reduce the total monthly mortgage payments for struggling homeowners. To do so, the Financial Stability Plan has allocated a total of $75 billion in incentives that should encourage lenders to modify loan terms.
Some components of the plan include:
- Shared Modification Responsibility: lenders will be responsible for modifying loans so that the borrower's payment is reduced to 38 percent of their monthly income. Following that point, the initiative will match further reductions dollar for dollar down to 31 percent.
- "Pay for Success" Incentives for Servicers will be awarded when borrowers stay current on a modified loan, in addition to an up-front incentive paid at the time a loan is modified under the program's guidelines.
- Borrower Incentives will entail a monthly balance reduction payment applied to the loan's principal as long as the borrower remains current on payments/
- Early action incentives will include payments to both the servicer and borrower when an at-risk loan is modified before payments become delinquent.
Who Qualifies -
- Borrowers whose combined mortgage balance exceeds the current market value of the home
- Individuals with high debt/income ratios
Who Doesn't – The administration has indicated that the following categories of borrowers will not qualify for this portion of the plan:
- Borrowers who do not live in the home
- Speculating investors or home flippers
- Borrowers whose mortgages exceed the Fannie Mae/Freddie Mac conforming limits