Fighting foreclosure with 31% of your income

Written By: George Haughton

Fighting foreclosure just became interesting for many home owners. I have taken one paragraph out of the president Obamba's speech to analyze it some more for my own understanding and to be able to write or blog about it. The flowing is the paragraph regarding how the government will work with the those in foreclosure:

"If lenders and home buyers work together, and the lender agrees to offer rates that the borrower can afford, we'll make up part of the gap between what the old payments were and what the new payments will be. And under this plan, lenders who participate will be required to reduce those payments to no more than 31 percent of a borrower's income. This will enable as many as three to four million homeowners to modify the terms of their mortgages to avoid foreclosure."

After reading the speech I got to wondering if this new payment was based on a new rate and current monthly income with a subsidy from the government for the difference? For example if the home owner makes $1000.00 per month then my monthly payments would be about $310 per month. However, what if my original monthly payment was $2000.00, which included my taxes and my income went from $2800.00 to the current $1000.00 will the government pay the difference? I really doubt this could actually be the case but that is how it sounds to some home owner fighting foreclosure. Other say this $310 is based not a traditional 30 mortgage but more like a 500 year mortgage. Fighting foreclosure just got easier.

This is what one reporter wrote quoting the president: "In prepared remarks today in Phoenix, the president said, “Let’s say you earn about $30,000 per year and you find a house that costs $232,500. 31 percent of your monthly income would be about $775, which puts you in a nice comfortable 443-year mortgage at an interest rate of 4.0%, which is fair for someone like you. You win, the banks win, and most importantly, the economy wins."

Again fighting foreclosure not only just got easier but if you can't stop foreclosure with this plan then you don't need to own a home right now.

How do I know if I qualify for this plan? Check the White House Web Site