As more homeowners run into trouble making their monthly mortgage payments, help is on the way from Wall Street -- and 1500 Pennsylvania Avenue.
Last week, Citigroup (Stock Quote: C) and JP Morgan Chase (Stock Quote: JPM) enacted temporary moratoriums on new foreclosures. And the Obama administration has just announced its housing plan, which launches March 4, a $75 billion effort to help struggling homeowners.
The centerpiece of those efforts is the Homeowner Affordability and Stability Plan. The plan does more than just lay out steps on how lenders should lower interest rates for homeowners that are delinquent on their mortgages; it also boosts access to refinancing for homeowners who owe more than 80% of their homes value. For a fact sheet on the plan, download a PDF from the Treasury Department’s website.
If you're stuck with a mortgage that's wrecking your finances, here's what you should do between now and March 4.
1. Keep making payments: You don't have to be delinquent to qualify for a change in the terms of your loan (referred to as a loan modification in industry-speak), so it's important to keep making your payments. "Homeowners that are current [on payments] but eligible for the new plan should continue to make their mortgage payments in a timely manner," says Gail Cunningham, vice president of public relations at the National Foundation for Credit Counseling. "Doing otherwise could compromise their credit report and score." Eligibility involves being at risk of imminent default, including having a high debt-to-income ratio (greater than 38%) or owing more than your home is worth.For homeowners that are delinquent and facing foreclosure, the best they can do is to sit tight. "Lenders aren't likely to start offering loan modifications until the government's plans come into effect on March 4th," says Cunningham.