Thousands of Americans who are lagging behind their mortgage payments are finding that home values have dropped so low that their loan amount is more than the price of the property. The number of homes with negative equity is around 11.2 million. This has created additional stress on the homeowners, especially those who are unemployed. The unemployment rate has already reached 10% in 2010. This indicates that a number of homeowners are on verge of losing homes to foreclosure. However, government is taking steps to help the underwater mortgages in the country.
Government is providing help to the underwater mortgages
Underwater mortgage is a curse on homeowners as negative equity makes it very difficult for them to qualify for refinancing according to a recent survey. However, the good news is the homes with negative equity have dropped to 21.5% (as compared to 23.3% in the first half) in the second quarter of 2010.
US government has announced to give $3 billion to the underwater mortgages. US treasury department is giving $2 billion to the HFA programs for the unemployed homeowners who are unable to make mortgage payments. Moreover, HUD is expected to provide $1 billion to the Emergency Homeowners Loan Program. This program will specially help those homeowners who are going through financial hardship due to unemployment or medical problems. This program will give no-interest loans (maximum $50,000) to the homeowners to pay off the principal amount, interest and insurance premiums for up to 2 years.
Few days back, Obama administration has declared to give 600 million dollars to the 5 states hit by foreclosures. The 5 states are Ohio, Oregon, Rhode Island, South Carolina and North Carolina. These states are required to submit plans to the government stating how they want to utilize the funds.
The HUD is modifying its refinance program that was declared in the beginning of the year, which will allow mortgage lenders to offer additional refinancing options to homeowners are underwater, on their houses. The FHA Short Refinance option is designed to help the underwater mortgages in the country. It is claimed that the changes will allow the government meet its objective of stabilizing the mortgage market by giving a second opportunity to around 4 million homeowners by the end of 2012.
It is said that from September 2010, the FHA will provide certain underwater who are making timely payments on mortgages and whose lenders consent to exempt around 10% of the outstanding principal balance, the chance to be eligible for a new FHA-insured home loan. However, in order to qualify for this program the homeowner needs to have credit score in and around 500, has to use the property as his primary residence and the loan-to-value ratio must be less than 115%.
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