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More benefits to Clevelanders in foreclosure

Here are a few more details about the Obama spending plan to help homeowners.  I wrote about some of the benefits to the borrower for doing loan mods last week.

1.)  The new plan incentives banks to offer plans that the homeowners can actually afford.  After 3 months of the homeowner remaining current on the new plan the bank will recieve $1000, and each year for the next three years that they stay current the lender will earn another $1000 for a total of $4,000.
2.)  The homeowner may be offered a reduction of up to $1,000 straight off the principle for their loan for every year they stay current on the plan up to 5 years.

3.)  The new plan will attempt to lower the payment (principal, interest, taxes and insurance) to 31% of borrowers gross income. To do this they will be able to lower the interest rate to as low as 2%. If the borrower still needs help then they can extend the term to 40 years.  If payment is still not at 31% of borrowers gross income then lender may lower interest rates on parts of the principal balance to 0%.

4.) The power to force a cramdown or the ability to lower the principal balance of the mortgage will be given to bankruptcy judges.

5.) Our dear Uncle Obama will subsidizes these short falls from his own pocket… :) Just kidding.  Actually the tax payers will have pay for all these taxes through increased tax burden and plummitting spending power with their dollars.  Ha ha.

6.) The lender will use time value of money formulas to compare the cost of letting a property foreclose verses modifying the loan to keep it current to decide whether and how to modify the loan or not.



Andy Morris is Real Estate Broker and expert short sale Realtor in North Eastern Ohio. He offers a helpful 7 part video lesson with tools to assist you in getting out of foreclosure. You can request this here.

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