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So what about those troubled mortgages?

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Is there hope yet for those having a problem paying their mortgage?

Having a hard time making your house payment each month? Are you one of the  estimated 27 percent of homeowners paying on a mortgage that costs more than your house is now worth? Still waiting on your bailout? Say hello to the $75 billion Homeowner Stability Initiative, which would provide a set of incentives to mortgage lenders in an effort to convince them to help up to 4 million borrowers on the verge of foreclosure.

The plan, funded through the first $700B bailout provided last year, seeks to restructure mortgages so that payments are no more than 38 percent of a homeowner’s income. And it doesn’t require you to be delinquent on your payments to qualify for help.

For those with less than 20 percent equity in their homes, the plan allows for refinancing of loans insured or guaranteed by Fannie Mae or Freddie Mac (approximately half of all loans). In other scenarios, incentives will be provided to banks to encourage them to help troubled homeowners. In return for lowering interest rates, lenders will receive money from the government. The plan is to give servicers an up-front fee of $1,000 for each eligible modification. As long as the borrower stays current, they will continue to receive $1,000 per year for three years. The incentive is deemed necessary because banks, in order to meet the 38 percent of income guideline, may need to lower interest rates below the current standard.

There are incentives for borrowers too. If a borrower stays current they will receive $1,000 per year for five years. That money will go directly to their principal.

For more on the stimulus: Will stimulus put us back on the gravy train? Business owners, call in the experts; From the horse's mouth or read the stimulus here.

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Landon Otis

Tagged as:

money, bailout, mortgages

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