Obama Mortgage Plan

The Obama administration is rolling out new efforts to keep borrowers in their homes. Although this plan will likely take a few months to be fully implemented, it may help those of you who have previously been left out in the cold.

Unlike many other refinancing plans, this plan rewards payment and high credit scores. People availing themselves of this plan will need to be current on their loans and have credit scores of over 500. You will also need to owe more on your home than it is currently worth. The plan is to write down the principal of the loan by at least 10%. (Source: WSJ pg. A5 3/27/10)

Homeowners who do not qualify but are staying in their homes should see a benefit once they decide to sell their homes. The intended effect is to stave off foreclosures. Foreclosures decimate values of comparable homes by reducing appraised values and comparative market analyses (CMAs). If appraisers and real estate agents remain with their current formulas, principal write-downs should have no impact on neighboring homes, as both appraisals and CMAs are based largely on sold comparables. (A foreclosure would be included, yet there is no sale with a principal write-down, so these homes would be excluded entirely.)

My suggestion is that anyone who thinks they may qualify for this program should contact their lenders, accountants, financial planners and/or attorneys to further vet the details and timing of this plan.