Are you one of those people who are having problems paying the mortgage? Is your home “under water” where you owe more than what your home is now worth? The next piece of the Obama Stimulus Plan announced today may provide you with some assistance. As with all legislation, it’s not light reading but let’s take a look at the important parts of the Homeowner Stability Initiative.
As President Obama said today, this plan will not help every American. He estimates that 4 to 5 million people could receive aid. It is not designed to help, in his words, “the unscrupulous or irresponsible.” Those investors who tried to cash in on the overinflated housing market and lenders who made irresponsible loans will be learning from their mistakes but for those families who have found themselves victims of the economic downturn, there may be some help.
The main objective in two words or less is “lower payments.” This program encourages lenders to refinance loans at much more favorable interest rates to hopefully relieve the problem of under water situations. The problem in the past has been that it has been nearly impossible to refinance a home that was under water but now the White House will provide financial incentive to those lenders.
There is a catch: In order to get this assistance, your home loan must be owned or guaranteed by Fannie Mae or Freddie Mac. If it is not, I’m assuming that you are not eligible for the aid. (If I’m wrong, I hope that someone will post a comment correcting me)
According to Treasury Secretary Timothy Geithner, we should begin seeing the positive benefits of this program nearly immediately. On March 4th, rules governing the changes will be published.
What are people saying about the Homeowner Stability Initiative? As always, when economic programs come from the government, we have an objective measure of the overall sentiment. The markets. It is widely known that the housing issues are arguably the cornerstone of the market meltdown so any program combating this issue in a positive way should send the market soaring. Did it? The Dow Jones closed up 3 points and the S&P 500 closed down .75 or 1/10th of a percent. The market was neutral. That doesn’t speak very positively about this program.
Listening to Wall Street insider comments, one sentiment seemed to be consistent. Wall Street is tired of bailouts. Somebody has to pay all of this money back.
If you are one of those people who have found themselves in an honest predicament due to circumstances beyond your control, I think all of us Americans are happy to help you. On a larger scale, this plan seems to be another not well received initiative. I hope I’m wrong. All of us want to see this recession end as quickly as possible.