What You Need To Know About Obama's New Mortgage Aid Plan

WASHINGTON -- The Obama administration on Friday announced a major reworking of its troubled $75 billion plan to prevent foreclosures. The revamped program is now designed to aid jobless homeowners and people who owe more on their mortgages than their homes are worth.

Here's a look at the details:

Q. How many homeowners will this help?

A. The effort is designed to enable the government to reach its original goal of helping 3 million to 4 million homeowners avoid foreclosure by the end of 2012. That benchmark has so far proved impossible to approach. Only 170,000 homeowners have completed loan modifications, out of 1.1 million who began the government's Home Affordable Modification Program since it started last year.

Q. How many borrowers are in trouble?

A. About 6 million homeowners have missed at least two months of payments. And experts warn that 10 million to 12 million borrowers are in danger of foreclosure over the next three years. A growing risk is among homeowners who are "under water": They owe more on their loans than their homes are worth.

Q. How does the new plan work?

A. Borrowers will get help in three ways: Jobless homeowners can get a three-to-six-month break on their mortgage payments. Banks will get financial incentives to reduce mortgage balances for under-water borrowers. And lenders can offer refinanced loans backed by the Federal Housing Administration to these borrowers.

Q. When will all these programs be available?

A. Government officials didn't specify but said they should become available in the coming months.

Q. I'm unemployed. How do I get help?

A. That piece of the program is designed to give homeowners more time to find a job. Borrowers will have three to six months in which they'll have to spend no more than 31 percent of their monthly income on their mortgages. If you do find a job during that time, you will be evaluated for a loan modification that could permanently reduce your payments. To qualify, you need to live in your home, have a mortgage of below $729,750 and receive unemployment benefits.

Q. What happens if I don't get a job after the time is up?

A. Lenders will encourage you to consider a short sale, in which you sell your home for less than the mortgage amount. Another option is a deed-in-lieu of foreclosure, in which you agree to hand back the property to your lender.

Q. I owe more on my mortgage than my house is worth. Will this help me?

A. Maybe. The program depends on the willingness of mortgage companies to participate. Their track record has been shaky at best.

Q. How does it work?

A. Mortgage companies that already participate in the government's foreclosure prevention program will have to consider reducing the mortgage amount for borrowers who owe at least 15 percent more than their home's current value. Those reductions will happen gradually over three years and apply only if you miss no payments. Those companies will receive expanded incentives to do so.

Q. What kind of incentives?

A. For every dollar of principal the lender reduces, they will receive a subsidy of 10 to 21 cents. The larger subsidies will help reduce principal of borrowers who are less under water.

Q. How do I qualify?

A: You must have a mortgage of less than $729,750. You also must show that you are in financial trouble. And you have to be spending at least 31 percent of your pretax income on your mortgage payment.

Q. So how do I apply?

A. Call the company that sends your mortgage bill, also known as your mortgage servicer, to see if you qualify. If you can't get hold of someone, try a nonprofit housing counselor. NeighborWorks America runs a national network of foreclosure counseling agencies. Try: http://www.findaforeclosurecounselor.org/

Q. How does the refinancing program work?

A. Some borrowers will be able to refinance into loans backed by the Federal Housing Administration, which insures loans against default. The FHA will get $14 billion in incentive money from the federal bailout fund to make this happen. Lenders will have to reduce the homeowners' primary mortgages by at least 10 percent.

Q. How do I qualify?

A. Homeowners must not have missed any payments on their home loans, must live in their home as a primary residence and must provide proof of income.

Q. How do I apply for the FHA plan?

A. You don't. It's voluntary for mortgage companies. They'll evaluate whether they want to offer this option to homeowners.

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Is Your Homeowner's Insurance Enough?

By: Vicki Hat

Many people are buying homeowner's insurance (HOI). They buy this not because it is required by the lenders but also to protect themselves to the cost of damages brought about by the different hazards in life. Aside from that, this also helps them pay for any injuries that their homes has caused to other people, may be as guests or not. This kind of insurance is very important for this matter because the damage can be very expensive to pay out of pocket. With the help of insurance, the homeowner's burden will be lightened a bit because all they would have to pay is the deductible (which is a fixed amount) and any excess of the full amount covered by the insurance.

However, some people are very disappointed with their homeowner's insurance. They feel that it is not enough. And they sometimes discover this too late. Some have experienced being so shocked only to be denied of their claim because the kind of damage occurred is not within the policy. This can be very frustrating; especially you do not have enough money to cover for the amount. Hence, many homeowners are left with the question if their HOI is enough.

Determining what is enough

Your insurance can be enough if it can cover all the possible damages that could take place within your property. To know this, you need to know by heart the conditions listed in your policy. This is the only way you can identify if you are properly covered. You need to look into the following things:

1. How the cost will be calculated? Will it be based on replacement cost or actual cash value? If it is actual cash, shift to a policy with guaranteed replacement cost especially if you have antique houses.
2. Analyze the policy and check if there is coverage for cost of living and loss of personal stuff.
3. Coverage for cost of living will pay for the accommodation you have obtained while waiting the house to be rebuilt or repaired. This only pays for a percentage of your insurance. On the other hand, lost of personal possessions will pay for both your stuff and valuables that has been damaged or stolen.

4. Understand the liability insurance. Most liability insurance has a standard coverage of $100,000. However, if your homes have had several histories of accidents, you can increase your coverage up to $1,000,000. But if you are so sure that your house is safe, you can settle for the basic.

But you also have to consider your funds. You also have to get the best of what your money could afford.

Therefore, it is important that you know your policy by heart. You must also pay attention to the natural disasters that are common in the area. If your basic HOI covers for this then good for you. At least you do not have to spend for the additional coverage. However, if not, you really have to prepare yourself for it. For sure, having the insurance is worth it.

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