Due to the effects of the sub prime lending era, many mortgage borrowers were approved for unaffordable mortgages. As the economy has continued to deteriorate and housing prices have continued to fall, more and more people are stuck with unaffordable mortgages iva that have a higher principal balance than the value of the home. This has led many people to consider both bankruptcy and foreclosure. However, for people considering bankruptcy or foreclosure, Obama’s 2010 financial relief plan could help a person reduce their credit card balances, obtain affordable mortgage payments, and stay in their home.
This relief plan, which has also been called the “Making Home Affordable Program,” is designed to help distressed borrowers. While the most mortgage lenders have drastically tightened their lending standards, the debt relief plan will entice lenders to help a borrower restructure their mortgage. The government is aiming to help borrowers who have a reliable source of income, but took on too large of a mortgage payment.
The plan will help a borrower in one of three ways with the ultimate goal of getting the monthly payment reduced to the point where it is less than 31% of the borrower’s gross monthly income. The first step the program will take is to reduce the interest rate on the loan. Since mortgage rates are at the lowest point ever, this is often the easiest and most effective way to reduce the monthly payment. If that does not have enough of an effect, the next step will be to re-amortize the loan over a longer period of time. If that still does not get the payment low enough, the third step would be to seek some principal forgiveness.
If a consumer has found themselves in a financial hardship beyond excessive mortgage payments, there are still various ways that they could save money and benefit from debt relief government grants. There are various grants available to consumers that are designed to help a person get out of financial trouble. To get one of these grants, a consumer will need to apply and prepare a relief grant proposal letter. The letter will outline how much debt the person is in, why they cannot afford to pay down the balances themselves, and how they plan to use the grant money. If approved, the federal government will either pay the creditors directly or send a check to the consumer with instruction to pay down the debt.