The Screeeech

Home Rescue Package

The Home Foreclosure Rescue Plan was announced by Sheila Bair of the FDIC. The new rescue plan is expected to reduce payments up to 31% and is forecasted to prevent 1.5M foreclosures. The plan is made up of 3 major points:

• interest rate reduction
• extended amortization
• deferred principle

The interest would start at 3% for 5 years then escalate 1% each year after. There will be no principle reduction, however, there could be a permanent amount deferred till the home is sold. The homeowner will still be expected to pay their mortgage but the payment is supposed to be tolerable. In order for the banks to receive “Loss Share” assistance, there are a few stipulations concerning the homeowner: it must the primary home and they will have to meet the payment schedule for 6 months. After that, the FDIC will agree to back the losses at approximately 50%.