The Economic Stimulus Plan and Your Mortgage

President Barak Obama’s $787 billion Economic Stimulus Bill has taken effect from March 4, 2009. Many American home owners are now wondering how this bill will affect the housing market. The bill focuses on improving the economy by reviving spending and creating jobs. The bill includes steps to get this done in this important segment of the American economy. You may want to know what will be the likely effect of this stimulus bill on your mortgage package.

President Obama’s plan is known as the American Recovery and Reinvestment Act. It is designed to address two groups of home owners - those who have high interest rates but are current on making payments but do not have enough equity to get refinance, and those who are at a near risk of losing their homes. This plan intends to provide $200 billion in finance backing to Freddie Mac and Fannie Mae to increase the available money for home lending purposes.

The important provisions of this Recovery Act are as follows:

FHA Loan Limits - These will be raised to $729,750 for high-cost areas for homes. The major benefits of an FHA loan are easier qualification standards and lower rates. The bill reinstates the 2008 FHA loan limits but with different maximum cap as specified above. The limit will expire on December 31, 2009.

Simpler Refinancing option - Borrowers who have less than 20% equity stake in a traditional loan guaranteed by Freddie Mac or Fannie Mae, can now refinance up to 95% of their home’s market value without needing to purchase private mortgage insurance, which can increase monthly payments by several hundreds of dollars.

Reverse Mortgages - The higher loan limits on “reverse mortgage” loans or HECM loans (as the FHA calls them - Home Equity Conversion Mortgage) has been raised to a figure of $625,500 until the end of the year 2009. This will help more senior home owners to use their home equity to get a stable source of incomes during their retirement age. They do not have to pay back the money to the lender, as long as they continue to live in the same house. This is a great way for seniors to get access to cash they need for their living purposes, if they don’t intend to make the home or property available as inheritance to their heirs.

Rural Housing Programs - 100% of financing money is to be made available for rural housing loan programs.

Energy Efficiency Ta Credits - Tax credits for energy-efficient home upgrades will be extended through the year 2010.

Foreclosure Protection - A $75 billion fund will be established to subsidize loan modifications for participating lenders to help homeowners facing foreclosure.

These are the salient points of the recent Economic Stimulus Plan made into law recently by President Obama.

One Comment

  1. chelsea says:

    Just wanted to know why homeq servcing is making borrowers put down money to do modifications , like two months of a note ? They said that this is not fees. Well I understood that all payments can be put at the end of the loan and attorney fees and filing fees and late charges would be dropped. Please explain this to me. I mean if I had this kind of money then I would not need a modification!!!!!!!