President Barack Obama announced a $75 billion plan to help between 7-9 million homeowners avoid foreclosure by restructuring or refinancing their mortgage. The plan has three components: 1) Enable 4-5 million homeowners to refinance. 2) Provide loan modifications to more homeowners. 3) Increase funding to Fannie Mae and Freddie Mac by an additional $200 billion.

What It Means to You

This program will help homeowners before they get behind in their payments. Most banks won't allow a loan modification until the borrower misses three payments. It provides a $1,000 a year principle payment for borrowers who stay current on their payments. It also helps borrowers who are upside down in their mortgages. Most banks won't refinance a mortgage unless the amount owed is less than 80% of the total value of the home. This doesn't help homeowners who have seen the value of their home plummet below the mortgage level. The government will help subsidize the cost to banks of reducing the size of the mortgage. The program will be paid for out of TARP funds.

Best Moves Now

• How to do a Short Sale
• Should We Walk Away?
• Compare Short Sale to Foreclosure