Home Preservation
Posted by gtong on December 8th, 2009
You bought your home a couple of years ago, and with the economy in the slumps, you’re having trouble with your mortgage payments. You might be one of many homeowners that have found themselves in a tight bind trying to look for another loan while they still have their mortgage to pay.You may have some good news as the FDIC is proposing to Congress to start up Home Ownership Preservation Loans (HOP).
This loan is designed to help homeowners keep their homes, but must be repaid in full. The HOP loan will be used to pay down 20% of the mortgage’s principal, and the remaining balance on your home loan, payments and interest, will be restructured to help you keep your house. The Treasury’s fund will help cover the first five years of the loan, but after that, the borrower must start repaying the loan.
The restructuring will change certain aspects about the mortgage as well:
• After the principal is paid down by 20% with the HOP loan from the Treasury, a new interest rate for the loan will be determined by the Treasury and capped at the Freddie Mac 30 year fixed rate.
• The restructured mortgage cannot exceed the borrower’s front end debt-to-income ratio (a debt-to-income (DTI) ratio for all housing related expenses greater than 35% of the borrower’s verified current gross income).
• If the borrower defaults, refinances, or sells the property, the Treasury will have priority recovery for the full amount.
To be eligible:
• The loan must be unaffordable. Defined by the FDIC as “front-end DTIs exceeding 40 percent at origination”.
• The original loan must be below the FHA conforming loan limit ($417,000 for the National Loan Limit in 2009).
• The loan also must have been originated between January 1, 2003 and June 30, 2007.
With an additional loan, it could mean that you can keep your home and fend off foreclosure. Which is always nice. Does your home need to be preserved?
Source: FDIC
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