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Refinance Plan to Stave Off Foreclosures

April 10, 2012 | Comments: 0 | Views: 112

The US Federal Government has come up with a refinance plan to stave off foreclosures. But the saddest part is that most homeowners are not eligible for this. After all 11 million, that is one in every four homeowners has a negative equity. That means they are paying more mortgage on their homes than their value.

This is proving to be a major obstacle in the revival of the economy. However, the Federal Government is hopeful that the new plan will benefit 1 million homeowners who are paying their mortgage on time. These people will be able to refinance even if their home values have dropped.

However, it is not very clear that how many people will benefit from the program. It may be pointed out that many people are not being able to pay their loan. Hence, their properties are being foreclosed upon. Economists are of the opinion that if the homeowners are willing to refinance then billions will be released into the economy.

Homeowners who have a negative equity are paying loans of 5.7 per cent. This rate has been fixed for the last 30 years. This has been released by The Associated Press and CoreLogic. In comparison, today's mortgage rate is 4.11 per cent as compared to the previous rate. A lower rate could translate to a lot of savings for the homeowner who has a mortgage of $250,000. In fact, he will be able to save $200 every month.

For an average American that could mean a lot - staying in the home or walking away as banks foreclose on the property. Barry Bosworth, economist, Brookings Institution, says, homeowners who have negative equity are very desperate.

Maggie and Dan Micoff say that they had bought a home in Marine City eight years ago. They had paid $119,000. Now their home has a negative equity, and they have to pay 6% loan. If they refinance, they will be able to save $120 every month. Maggie Micoff said, "The banks won't work with us. We helped bail them out, and now we can't even get a personal loan to get by. We could rent something for a few hundred dollars cheaper."

There are many homeowners who have equity. However, they are not refinancing. There are also people who are unable to meet the tight lending standards. Hence, the borrowers who have a negative equity are the best people who will be able to unleash the purse strings.

Karen Anne, has been working on studying the foreclosures market, helping buyers on the finer points of Charleston foreclosed homes for sale. Try to visit and search Foreclosure Homes.

Source: EzineArticles
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