President Obama has put together a plan to help 9 million homeowners stay in their homes. The plan calls for $75 billion to subsidize rates and help protect servicers from falling home prices.
In a sharp reversal of the Republican plan, which calls for servicers to voluntarily restructure loans, the Democratic plan will provide incentives for servicers to help homeowners stay in their homes by modifying loans, reducing payments, subsidizing interest payments, and protecting servicers from falling home prices.
Servicers will receive $1,000 for each loan modification and an additional $1,000 a year for three years if the borrower remains current on payments. The plan would also give $500 to servicers and $1,500 for mortgage holders if they modify loans before a borrower falls behind in payments.
Obama will also work with the bankruptcy laws to allow judges to modify mortgages.
The mortgage relief would be available to borrowers who are at risk of falling behind in payments and those that have already fallen behind. The goal is to reduce monthly payments to less than 31% of a borrowers monthly income .