Fannie Mae and Freddie Mac to provide mortgage and foreclosure help.
The mortgage assistance plans offered by these companies are very important because Fannie Mae and Freddie Mac guarantee or own over 30 million U.S. mortgages, which is over 60 percent of all single-family home loans. The number of mortgages they support and own also continues to grow on a daily basis. The two lenders truly dominate the mortgage industry and are key to keeping the marketplace operating effectively.
By many estimates, the new government plan could help over 600,000 families that are currently delinquent on their mortgages. It can assist a borrower that will soon fall behind on payments or it can help those facing the mortgage foreclosure process.
To qualify for help for one of the plans, mortgage borrowers would need to be at least three months behind on their home payments, and they would need to owe 90 percent or more than the home is currently worth. Investors who do not live in their homes would not be eligible for financial aid as would borrowers who have filed for bankruptcy.
Borrowers could receive help in several ways. They include:
1) The interest rate on their current mortgage would be reduced so that borrowers would not need to pay more than 38 percent of their gross monthly income on housing expenses or towards mortgage debt.
2) Another option is for the mortgage loans to be extended from 30 years to 40 years. This will in effect reduce payments and it will also allow for some of the principal due to be deferred interest-free.
3) If the borrower has no other option but to foreclose, Fannie and Freddie may rent the home back to the borrower. More on Freddie Mac rentals for mortgage borrowers.