Vikas Bajaj of The New York Times reports on a Home Refinancing Program (that) Aims to Help Owners Stay Put:
New York State and the Federal National Mortgage Association will announce plans today to refinance up to $100 million in mortgages for homeowners who are facing the prospect of higher monthly payments on troubled home loans in the coming months, officials said.
A mere bandage for a problem that needs a tourniquet. But some relief nonetheless.
The plan, which is called “Keep the Dream,” is expected to provide enough money to cover several hundred mortgages. It is similar to programs adopted by several states, including Massachusetts, Ohio and Maryland, that are trying to address, in a limited way, the fallout from the aggressive home loans made during the recent housing boom.
In the coming year and a half, mortgage experts say, about $800 billion in adjustable-rate mortgages will reset to higher interest rates. Though most homeowners should be able to refinance, economists worry that many may no longer qualify for a new loan because lenders have become stricter and home prices have been falling in most parts of the country outside Manhattan.
The powers that be at both the Federal and State level seem to acknowledge that this is just the beginning of what needs to be done to prevent further meltdown.
At the federal level, Senator Charles E. Schumer, Democrat of New York, has introduced a bill that would offer $300 million in federal funds to refinance and provide counseling for borrowers nationwide who are encountering difficulties. The senator also hopes to raise $600 million from private lenders.
Now $900 million may seem like a lot of dough to some, but considering some of my colleagues sell $100 million worth of real estate in any given year, this hardly seems like it will make any great impact on the troubled mortgage market. With an average home price of about $250,000, this program would help about 400 people nationwide assuming Schumer successfully gets the $600M of private money.
Having said that, it will provide relief for those who meet the following guidelines:
The loans can be no bigger than $427,000. Borrowers cannot earn more than 125 percent of the area median income in upstate New York and 165 percent of the area median income in the city and its suburbs.
If you do in fact meet these guidelines, you can apply for these loans beginning in September. For the rest of you, buckle in, it’s gonna be a wild ride!