I AM PAYING MY MORTGAGE. IS THERE ANYTHING IN THIS BAILOUT FOR ME?

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Will the Mortgage Bailout Help Me If I Continue to Make My Payments?

The new economic stimulus plan passed by Congress and signed into law by President Obama has a mortgage bailout plan that can help millions of Americans save their homes. However, just because you currently are paying on your mortgage does not automatically disqualify you – nor does defaulting on payments qualify you for help with this program.

Millions of Americans lost their home due to foreclosure in 2008. Most resulted from job loss that prevented a homeowner to make his or her mortgage obligation each month. Other foreclosures were trigged by adjustable rate mortgages (ARMs) that escalated to an unaffordable point. Whatever the case, millions more are expected to enter into foreclosure over the next few years unless there is help.

How the Mortgage Bailout Plan Works

In the mortgage bailout plan, approximately $75 million will be available to help lenders and borrowers work out a solution to avoid foreclosure. Some of the money will be used as guarantees to lenders who agree to restructure a loan currently in default. This will help thousands of homeowners whose lenders were hesitant or unwilling to renegotiate mortgage terms.

The Homeowners Who Qualify for Bailout Assistance

Who qualifies for help with the mortgage bailout plan? The federal program will focus on helping homeowners who are undergoing financial hardship. If you have lost income due to unemployment, layoffs, disability, etc, you could be in jeopardy of losing your home because you are unable to pay your mortgage. In this scenario, the government would consider helping you.

However, even if you qualify for federal help to get your loan restructured or modified, you still must be able to meet a new mortgage payment obligation. If you are unemployed and have no definitive prospects for new employment, how can a lender know that you will pay your mortgage, even if it is more affordable? If you want to qualify for federal help, be sure you have secured a monthly income that will be able to meet a monthly mortgage obligation.

Another issue that the federal bailout will be analyzing is your mortgage to income ratio. If your mortgage payment is more than 31% of your gross monthly income, you may be eligible to get help to restructure a deal that brings your payment below 31%. If, however, your current mortgage payment is 31% or below your gross monthly income, don’t expect to receive help.

The Homeowners Who Do Not Qualify for Aid

Even if your mortgage payment greater than 31%, you may still be ineligible for federal bailout help. As long as your debts are low enough, you can afford your mortgage, and you are not currently delinquent, you may not qualify for aid.

The best advice for any homeowner is to continue making mortgage payments to protect your credit and avoid entering into a foreclosure situation. Also, it is always wise to talk to your lender or mortgage servicer about your financial situation. Open communication is always the best strategy in keeping current with your mortgage and working out a deal if you have a financial crisis.

This article is intended for general information. Always seek sound financial and legal advice before making any financial decision

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