I JUST heard on the news today that President Obama has unveiled a large scale mortgage modification and home lending plan designed to reduce the number of foreclosures. Apparently, $75 billion has been allocated for mortgage modifications and $200 billion will be used for backing government-controlled giants, Fannie Mae and Freddie Mac. Total cost to taxpayers: $275 billion. This is all part of the $787 billion economic stimulus package that the president has already approved.
Analysts cautioned that although as many as 9 million homeowners may benefit from this plan, it would not come close to stopping the tidal wave of foreclosures. Currently, the delinquency rate on all mortgages across the country is close to 10% and it is estimated that unless something is done about the foreclosure crisis, as many as six million families could lose their homes in the next 3 years. The president’s plan has been praised by consumer advocates as well as the financial industry.
The plan has 3 components. The first would help consumers who are not delinquent but are paying high interest rates and cannot refinance due to lack of equity in their property. A second component would help about 4 million people who need to modify their mortgage in order for the payments to become more affordable. Apparently, the government intends to provide financial incentives to lenders who will work with borrowers in modifying their loan. The last component would be to increase the credit available for mortgages in general by providing additional funding of $200 billion to Fannie Mae and Freddie Mac.
The administration expects to publish detailed rules explaining the plan as early as March 4. Until the Obama plan is adopted, banks including Citimortgage, JP Morgan Chase & Co., PNC Financial Services Group, Inc. and Bank of America have agreed to suspend foreclosure proceedings temporarily.
Obama has also said that he will support legislation that will allow US Bankruptcy Courts to reduce mortgages on primary residences to fair market value as long as borrowers pay their debts under a court-supervised Chapter 13 plan. Chapter 13 is a part of our Bankruptcy Code that allows an individual with regular income to reorganize and pay debts over a 3-5 year period. The banking industry opposes this proposed legislation on the grounds that it would only eventually increase the cost of lending. It also did not have any support from the Bush administration. Current bankruptcy laws restrict bankruptcy judges from modifying mortgages while other debts such as credit cards and other consumer loans can be modified in bankruptcy.
If you or someone you know are currently facing foreclosure, we can help you evaluate your options. To schedule a free confidential consultation, please call Toll-Free 1-866-477-7772. We have offices located in Glendale, Cerritos and West Covina.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped more than 4,000 clients in finding solutions to their debt problems. To schedule a free attorney consultation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772).
( Published on February 25, 2009 in Asian Journal Los Angeles p. B2 )
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