Mortgage bailout plans are designed to give financial relief to homeowners so that their mortgages become manageable. This however doesn’t imply that their payments are forgiven. The bailout programs are worked out in such a manner so that a homeowner’s property can be protected from foreclosure. The homeowners are usually helped by reducing their mortgage rate of interest thus enabling them to make payments that are affordable.
There are many people who oppose the idea of implementing the mortgage bailout plans. The main reason is they think that consumers who have not been able to manage their finances well should not be given the benefit of bailout plans. There are yet others who feel that the consumers should be bailed out because often it is due to the lenders’ faults that homeowners fall into trouble.
When does a country need mortgage bailout plan?
Mortgage bailout plans are usually required when the mortgage market of a country faces crisis and is threatening the economy. As such the financial markets become volatile. It is then that the government introduces the bailout plans. Such instances can occur when banks provide loans to people who don’t qualify for one. In due course, the borrowers start falling behind on payments. The delinquencies reach such a point that homeowners face foreclosure. The government steps in with its Mortgage Bailout Plan.
Bush Administration introduced the first Mortgage Bailout Plan
On December 6th 2007, President George Bush unveiled the first Mortgage Bailout Plan. The Plan failed to bailout all homeowners. The plan helped homeowners with ARM or adjustable-rare mortgage loans. It failed to address the needs of homeowners with FRM or fixed-rate mortgages.
President Obama introduced another mortgage bailout plan on February 18, 2009. It is known as Homeowners Affordability and Stability Program. The program allocated USD$75 billion for helping homeowners. The program allows homeowners to refinance and modify their existing mortgages. It would take care of both homeowners with fixed-rate mortgages as well as adjustable-rate mortgages.
Contributed by Mortgage Community Member.
The Mortgage Bailout Plan introduced by Obama Administration addresses problems related to fixed-rate as well as adjustable-rate mortgages.mortgages
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