Scott Conlon

The rate of foreclosures decreased by about 10% in January 2009 from the prior month, December 2008. The rate of foreclosures is still up almost 18% from January 2007. So what is President Obama and Congress doing to recover the housing market and slow down the foreclosures? The recently passed legislatures is supposed to do just that.

President Barack Obama announced a $75 billion plan to lower monthly mortgage payments and keep up to four million distressed homeowners in their homes. How exactly will this plan help in the housing recovery? Is this new legislature just another bailout plan? Who will be affected by a foreclosure bailout? How do I benefit from Obama’s Stimulus Plan if I do not yet own a home?

There are two main focuses on the recovery of the real estate market. The Homeowner Affordability and Stability Plan, also known as the Making Home Affordable program, is aimed to assist more than 9 million people with nearly 6 million homes that are either in or at-risk for foreclosure, a record high. The stability plan will allot $75 Billion to aid homeowners that are in distress with paying their mortgages. The money is being used to renegotiated mortgages (Home Affordable Modification Program) to help lower payments and keep residents in their homes as well as help refinance homeowners’ mortgages (Home Affordable Refinance Program) to a lower interest rate who have not been able to do so due to the value of their homes decreasing dramatically. The idea is that homeowners should not have a mortgage note that costs more than 31% of their income. Through the Home Affordable Refinance Program, refinancing aid is available for four to five million homeowners who receive their mortgages through Fannie Mae or Freddie Mac and who have a solid payment history. The Home Affordable Modification Program aimed at helping those that have been struggling to pay their mortgage through no fault of their own. This includes homeowners that have recently had a change in circumstances that causes financial hardship or is facing a recent or imminent increase in the payment that will burden financial hardship. To learn more about the “Making Home Affordable” Program visit FinancialStability.gov.

So what if you have been paying your mortgage and are not at risk of foreclosure? Many people have raised concerns that this plan is bailing out people that have made bad decisions in buying a home and feel that it is not fair to help those that are unable to pay for their homes. Obama has made statements that this plan is to help everyone in this struggling economy. If you own a home and your neighbors home is foreclosed, that lowers the value of your home. As Obama stated, neighborhoods are struggling as home values have been dropping due to the number of foreclosures. This stability plan will help reduce the number of foreclosures thus saving the value of many Americans’ homes.

For those that have been thinking about buying their first home but have been hesitant due to the current state of the economy, the American Recovery and Reinvestment Act of 2009 has provided a great incentive to do so. Under the new tax provisions recently signed into law, a new home buyer that purchases their home after January 1, 2009 and before December 1, 2009 will benefit from the new tax break. Under this new Refundable First-time Home Buyer Credit, if you purchase a home during this period you may be eligible for a credit of $8,000. Previously the First-time Home Buyer Credit of up to $7,500 was a no interest loan that needed to be paid back over the course of 15 years, but now the credit does not require the funds to be paid back and acts solely as a one time credit on either your 2008 or 2009 tax returns. If you are looking to purchase your first home during this time you can learn more about the Refundable First-time Home Buyer Credit on the irs.gov website.

So no matter what your circumstance is regarding the housing market, it is important to know that it affects us all and if needed, there may be help or benefits out there for you. Whether these new legislatures will indeed impact the real estate crisis or not, only time will tell.