Goverment Expands Plans for Housing Aid

Earlier today, the Obama administration announced plans to expand the help available for those affected by the housing crisis. During the housing boom, many mortgage lenders offered second loans to potential homebuyers so that they’d be able to purchase real estate even without a down payment. Obama’s new plan would offer incentives to lenders to help consumers dealing with these piggyback loans.

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Second loans are affecting about half of all homeowners struggling with ther mortgages. Unfortunately, homeowners who are trying to refinance for a lower monthly payment need permission from the company holding the second mortgage, and this a roadblock for borrowers trying to get back on their feet.

The new second mortgage initiatives will be funded from the money already allocated to the overall housing aid plan. Mortgage companies will get $500 for each modified plan, plus an additional $250 a year for three years if the borrowers don’t default. Borrowers, on the other hand, would get up to $1000 over five years that can be used to pay off the principle of a first mortgage.

Additional incentives would give $2500 payments to mortgage companies who agreed to participate n the Hope for Homeowners program, which was launched last fall.