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Federal mortgage aid coming

POSTED April 2, 2010 11:15 p.m.
Those in danger of foreclosure may be newly eligible for help from the federal government. A recently expanded government program will reduce mortgage payments for the unemployed and cut the principal for underwater mortgage holders.
President Barack Obama’s Making Home Affordable program was expanded earlier this week, with aspects of the Home Affordable Modification Program extended to more borrowers.
“It is encouraging to see the Administration is recognizing the dire state of the housing market in areas like the San Joaquin Valley and the impact that it is having on the overall economy,” said Rep. Dennis Cardoza (D-CA 18). “Although this will not help everyone who is hurting, this does appear that it will help many of those in our community.”
The new changes require mortgage lenders to temporarily reduce or eliminate payments for many unemployed homeowners. Mortgage payments would be capped at no more than 31 percent of a borrower’s income for three to six months while the homeowner is job hunting and, in some cases, payments could be deferred.
Eligible homeowners must live in their home, have a mortgage less than $729,750, and receive unemployment benefits to qualify for the short-term payment relief.
The program also offers lenders financial incentives to reduce the principal for underwater borrowers, or refinance the upside-down mortgages into new, Federal Housing Administration-backed loans. These programs are reliant upon the cooperation of mortgage companies, however.
Lenders who take part in the program are asked to reduce the principal for borrowers who owe at least 15 percent more than their home’s current value. The reductions would occur gradually over three years, and apply only to borrowers who remain current on their loans.
Borrowers must have a mortgage of less than $729,750, a payment of at least 31 percent of pretax income, and be able to demonstrate financial trouble to qualify. Primary mortgages would be reduced by at least 10 percent under the program.
The program will be funded by $50 billion in existing Troubled Asset Relief Program funds – a 2008 government program initiated by then-President George W. Bush which allows the U.S. Treasury to purchase or insure up to $700 billion of toxic assets to prevent large banks from collapsing. The mortgage aid program will be implemented over the next six months.
For more information on the program, visit MakingHomeAffordable.gov or call (888) 995-HOPE.
To contact Alex Cantatore, e-mail acantatore@turlockjournal.com or call 634-9141 ext. 2005.
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