Homeowners get a helping hand

11.12.08
By Sarah Beldo

These days, owning a home can sometimes feel more like a liability than an investment - particularly if your property is losing value.

However, some homeowners are set to receive assistance. Those who have been struggling to meet repayments on their home loan may qualify for a new government program that aims to help these households avoid foreclosure.

Foreclosures have increased by 150 percent over the past two years, according to the Federal Housing Finance Agency, which has prompted calls for a financial rescue package targeted at those who cannot repay their mortgage loans within their current terms.

Under the scheme introduced on Tuesday, some homeowners would have their mortgages readjusted so they have lower interest rates and a longer time frame to pay the money back.

Are you wondering if you qualify for an adjustment?

First of all, only home loans guaranteed by Fannie Mae and Freddie Mac can be changed under the plan, which does not include measures to reduce the total balance of the loan.

Homeowners may be eligible if they are at least 90 days late in their repayments, live in the home on which the mortgage was taken out, owe at least 90 percent of the property's value and have not filed for bankruptcy.

Critics of the plan say that it does not go far enough to address problems faced by property owners. For example, many people who are not at risk of imminent foreclosure are still in deep financial trouble because they owe more on their mortgage loan than their house is worth.

"As we lend and invest hundreds of billions of dollars to help institutions suffering leveraged losses from defaulting mortgages, we must also devote some of that money to fixing the front-end problem: too many unaffordable home loans," said FDIC chairman Sheila Bair.

So, the bottom line is that if you are among the worst-off in this housing crisis, you may find your situation improved by the FHFA plan. Those who qualify for the program will receive notices about their eligibility.

If, however, you are among the millions of Americans who is not at risk of losing their home but still owes more than is manageable, this plan may not help.

However, some lenders - such as Citigroup, JP Morgan Chase and Bank of America - have already unveiled home loan modification programs recently that could help others. And further plans could soon be on the way.

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A government scheme could help people avoid foreclosure