3 Keys to the Homeowner Affordability and Stability Plan that will Help Northwest Arkansas Homeowners
February 19th, 2009 categories: News and Events
President Obama laid out the outline of the Homeowner Affordability and Stability Plan on February 18th in Phoenix, Arizona, a state touting the third highest foreclosure rate in the nation. Here are three (3) Keys to the Plan that will directly affect an estimated 9 million Americans, and hopefully, indirectly help all of us climb out of a recession.
Key Elements of the Homeowner Affordability and Stability Plan and How They Relate to the Northwest Arkansas Housing Market
Refinancing help for up to five million homeowners whose mortgages are through Fannie Mae or Freddie Mac
This is a very good part of the Homeowner Affordability and Stability Plan (henceforth HASP) for homeowners in Northwest Arkansas. Why? Because most home loans in our area are conforming loans through one of these institutions and are eligible for refinancing under these new rules. Even if you owe more than your home is currently worth, you should now be able to refinance into a 15 or 30 year, low fixed-rate loan at a historically low rate and cut hundreds and thousands of dollars off your mortgage payments. This should help a certain segment of Arkansans that are:
- Upside down on their mortgage
- Paying high rates on their mortgage
- In need of some additional money to make ends meet
Complete eligibility details will be announced on March 4th when the program starts. Subscribe to my feed to learn about all the latest developments.
New incentives for lenders to modify terms of existing sub-prime loans at risk of default and foreclosure creating a $75 billion Homeowner Stability Initiative helping up to four million people
This part of HASP will help homeowners in Northwest Arkansas that are hard-pressed to meet their mortgage each month and, through no fault of their own, cannot sell their homes because of the recession, market conditions, and falling home values. The Homeowner Stability Initiative will help homeowners who commit to make reasonable monthly mortgage payments stay in their homes in several ways:
- Through a shared effort to reduce monthly payments the lender and HASP would bring the ratio of mortgage payment to monthly income down to a very manageable 31%.
Ex. If you, as a borrower, had a $220,000 mortgage on a home in Bentonville this could reduce your monthly payment by over $400. - Incentivizing borrowers to stay current by providing a monthly balance reduction payment that goes straight towards reducing the principal balance of the mortgage loan. As long as you are current on your loan, you could get up to $1,000 each year for five years to pay down the balance of your loan.
- Reaching borrowers before default by offering the mortgage holder a $500 incentive payment and the borrower that is at risk a $1,500 incentive payment if the at-risk loan is modified before the borrower falls behind.
- The FDIC will offer a partial guarantee initiative created by the Treasury Department designed to discourage lenders from opting to foreclose on mortgages that could be viable now out of fear that home prices will fall further.
Supporting low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac
An important point to note for taxpayers is that the funds for this portion of HASP were authorized by Congress in 2008 and are not part of the dollar amount of the stimulus package that President Obama signed into action.
While mostly ‘finance speak’ in nature, this part of the Plan will:
- Promote stability and liquidity in the marketplace
- Provide forward-looking confidence in the mortgage industry
- Increase the size of mortgage portfolios that that FNMA and Freddie Mac can continue to provide assistance in addressing housing market problems
- Support state housing finance agencies in serving local home buyers
What does all this really mean for me?
For Homeowners in trouble…
This means that you may finally see some help in:
- Lowering your monthly payments to maneagable levels
- Staving off foreclosure
- Putting some money back in your pocket
For Homeowners not in trouble…
This means that you will see:
- Neighborhood home values normalizing as the number of foreclosures drop
- Your home value stabilize
- The home you have for sale show more and sell sooner as lenders begin lending more money more freely
Check out the White House blog for a complete rundown of the facts and plans surrounding the Housing Affordability and Stability Plan, or go here. I would be glad to email you complete copies of the plans if you would like to contact me as well.
There is a lot of speculation as to whether this plan will work, if it has been thought through, and if the government is in over it’s head. I for one believe that this is a definitive step down the highway of recovery and rejuvenation for America’s housing market and particularly for Northwest Arkansas’ housing market. I’d love to hear your thoughts on HASP and EESA (Emergency Economic Stabilization Act) and the challenges you foresee in implementing these plans.
