Treasury Secretary for the U.S. Tim Geithner recently announced the government’s plan to confide over $1 trillion in reforms to rescue the financial system of the country. In fact, a good amount of fund from this package will go into financing loan purchases and reviving the economy through modified lending activity.
By this, they hope to reduce the high interest rates which present an obstacle to many potential home buyers. The plan also exists to steer homeowners away from foreclosure and toward loan modification.
Agenda Of The Plan:
The stipulations of the Bank Bailout Plan are as follows:
1. The loan ratio has to be more than 105% of the actual appraisal of the home in order to be considered for a loan modification.
2. The modified monthly payments cannot exceed 31% of the total monthly income.
3. All of the loans and payments must not total more than 55% of the homeowner’s earnings before taxes are deducted.
4. $1000 awarded for each loan modified by banks or lenders will provide impetus to participate in the federal loan modification programs.
5. President Obama has proposed a budget of $75 trillion dollars to finance the program. Qualified financial counselors will also be made available to borrowers in imminent danger of foreclosure via various nonprofit groups.
Goal:
The Bank Bailout Plan has four goals:
1. The plan seeks to balance the system and restore consumer faith. The failing economic system will be buttressed by the federal bank regulators to rebuild the economy.
2. This plan will increase the much needed credit flow to businesses and consumers.
3. The deteriorating economy will regain resilience which in turn will provide adaptability to those loan modification programs already in existence.
Home foreclosures will decrease as the housing market becomes more equitable towards the consumer looking for a home.
The plan naturally may not be helpful for all the home loan borrowers, but is certainly a positive step to bring stabilization in the slumping real estate market through loan modification.
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