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Mortgage Rescue Plan Incentives for Lenders

Francine L. Huff
LoanBiz Columnist

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Some changes have been made to the Obama administration's mortgage rescue plan that could help more homeowners avoid foreclosure. More incentives are being offered to mortgage lenders to help homeowners in the most troubled housing markets. Also, some people who haven't qualified for the mortgage rescue plan thus far may be able to qualify for a short sale.

A short sale would allow homeowners to sell their home for less than its mortgage balance and get out from under their mortgage. Under the plan, a mortgage lender would receive a $1,000 payment for allowing a short sale transaction. They would also receive $1,000 for approving a deed-in-lieu transaction, which involves transfering the deed back the lender to avoid foreclosure.

Incentives for Borrowers

Borrowers will also receive incentives for doing a short sale or deed-in-lieu transaction. Depending upon the case, they could receive up to $1,500. Second lien holders will receive $1,000 to give up their right to claim what they are owed.

Mortgage lenders would also receive incentives that will be calculated based on recent declines in home prices in hard hit, high-cost areas. These calculations could add thousands of dollars to the total amount of incentives a loan servicer can receive for lowering mortgage loan payments.

Homeowners who aren't sure what kind of help they might be able to get should check with their mortgage lender to determine their eligibility for help through the mortgage rescue program. If they've already determined that they aren't eligible for the mortgage loan modification program or a refinance, a short sale or deed-in-lieu may be their only option to avoid foreclosure.

Short Sale Checklist

To increase the chances of getting approved for a short sale homeowners should:

  • Find a Realtor who is experienced with short sales
  • Write a letter detailing their financial hardship
  • Try to find a buyer before approaching their mortgage lender
  • Make sure they provide all documents requested by their lender.

So far around 55,000 people have had their mortgage loans modifed under the rescue plan. That's only a portion of the homeowners the government has said it expects to help. Also, some experts say the Obama administration may need to do even more to help the millions of homeowners who aren't eligible for help at this point.


About the Author
Francine L. Huff is a freelance journalist and the author of The 25-Day Money Makeover for Women. She has appeared on a variety of TV and radio shows.

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