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Government Loan Modification and Refinance Program Shows Substantial Progress In Short Time
June 18th, 2009
200,000 mortgages have been
worked out under the government’s Making Home Affordable Program with
40,000 mortgages modified and completed last week, according to Shaun Donovan
who is secretary of the U.S. Department of Housing & Urban Development.
“We have made
substantial progress in a short period of time” said Donavan, addressing a
group of real-estate writers and reporters attending the National Association
of Real Estate Editors Conference being held in
Mortgage rates are currently
unstable and look likely to rise causing some difficulties for loan shoppers.
However, mortgage rates are still close to historical lows and remain a good
bargain.
Donovan revealed that the current
foreclosure-prevention program is showing more success than previous government
efforts. While modifications are accelerating at a favorable rate, Donovan is
hopeful that we will reach modifications by the millions.
The new Obama plan announced
earlier this year allows modifications to be truly affordable. In the new
program, there’s a standard 31% debt-to-income ratio. In other words, the
borrowers modified mortgage payment should not exceed 31% of his or her gross
income.
The 2nd part of
the plan is the refinance program that allows borrowers who are on time with
their payment to take advantage of lower mortgage rates. There are many
borrowers who cannot qualify for a refinance because they owe more than the
current worth of their home. To qualify for the refinance program, the
borrower’s loan-to-value ratio must be no higher than 105%. James B.
Lockhart III, director of the Federal Housing Finance Agency says that there
has been talk about raising the limit.
On July 1st 2009, the Obama
administration officially raised the loan-to-value ratio to 125%. This is great
news as it now includes a larger percentage of people to qualify for the
refinance program. – Edited and updated by mortgage-foreclosure.org
Donovan explained that not
every foreclosure can be prevented. Part of the overall foreclosure-prevention
programs is designed to provide alternative solutions to families on the brink
of losing their homes. For example, a short-sale will not damage the
homeowner’s credit if compared to an actual foreclosure. A short-sale is
when the home is sold for less than what is owed on the mortgage through
permission from the lender. This is a helpful option for
those who are ‘underwater’ on their mortgages.
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