The latest installment of government refinance assistance programs was unveiled today. We get this from the AP story on the subject:
After months of criticism that it hasn’t done enough to prevent foreclosures, the Obama administration announced on Friday a plan to reduce the amount some troubled borrowers owe on their home loans.
The multifaceted effort will allow people who owe more on their mortgages than their properties are worth to get new loans backed by the Federal Housing Administration, a government agency that insures home loans against default. …
To be eligible for the FHA refinancing program, borrowers who owe more than the value of their homes, known as being “under water,” must not have fallen behind on their existing mortgage payments.
Separately, the program also would reduce monthly payments for unemployed homeowners for up to six months.
The administration cautioned that the plan isn’t intended to stop all foreclosures or assist all troubled homeowners. …
The plan will also allow lenders to refinance mortgages that are under water with a new loan backed by the FHA. Lenders will have to reduce the first mortgage by at least 10 percent. And the combined total of second mortgages and other liens cannot be more than 115 percent of the current value of the home.
The four big holders of second mortgages — Citigroup Inc., Bank of America Corp., Wells Fargo & Co. and JPMorgan Chase & Co. — have now joined the government’s program to modify second mortgages, after pressure from the Treasury Department. That program was delayed for months but now the major players in the industry are on board.
