After a year of discussion, Attorney General Eric T. Schneiderman of New York and California's attorney general, Kamala Harris have pointed to the fact that they are closer to an agreement regarding the Mortgage Relief Plan.
There are 3 specific situations in which the Mortgage Relief Plan will be of great help to the homeowners. They are as follows:
1. Mortgage is underwater but homeowner is current on payments: There are around 10 million homeowners who are underwater on their mortgages, i.e. they owe more on their mortgage than their property value. The underwater mortgages are mainly due to the decline in home prices. Thus, though the interest rates are at an all time low, yet they are unable to refinance. If the Mortgage Relief Plan comes into effect, then it would help people who are paying the loan on time to save about $3,000 a year on their mortgage by helping them refinance their mortgages with low interest loans. These low interest loans will be guaranteed by the FHA.
2. Home loan is underwater and homeowner is behind on payments: It has been planned that $17 billion will be set aside for principal reduction for those homeowners who are delinquent on their mortgage payments and owe more than their property value. However, the amount will depend upon how many states decide to participate in the program. Apart from this, it should be noted here that the plan would not assure any minimum amount of mortgage relief by the state.
3. Homeowners suffering due to foreclosure fraud: Under the Mortgage Relief Plan, around 750,000 families who have suffered foreclosure fraud will receive payments of about $1,800. Since 2010, federal authorities have been investigating the practice of robo-signing and trying to help the victims. The Mortgage Relief Plan, if comes into affect will be of great help for such victims.
If the plan is passed, then compensation may be given to people who lost their homes in between January 1st, 2008, and December 31st, 2011. However, homeowners won’t lose their right to sue the financial institutions.