The Bush administration today rolled out a plan to help homeowners in trouble with their mortgages. While proclaiming big help the plan does not go anywhere near far enough to help those in the most trouble.
Homeowners 90 or more days late in their mortgage payments, owe at least 90% of their home’s current value, live in the home on which the mortgage was taken and have not filed for bankruptcy are eligible.
The major issue is that this plan will not reduce the total amount owed on a home that is now worth less than what is owed against it. Also, people who don’t file bankruptcy are eligible but so many people are loaded up with all sorts of debts that bankruptcy is an accelerating solution for a lot of people.
The Bush mortgage plan is not an industrywide plan so don’t get all excited that it is either law or to be offered by all lenders.
Under this plan borrowers may be able to have their interest rates reduced or loans extended out for a decade longer to reduce the monthly payment. The goal would be to reduce the mortgage payment to 38% of the monthly household income. Citibank recently announced a similar plan but set their target at 40% of income.
This new program may not help homeowners in need if the lenders or investors in the mortgages don’t agree to the proposed modification. This new initiative by the Bush administration sounds nice but like a lot of other attempts comes up short and not full of meaningful assistance.