Who gets mortgage help

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In Washington, the House is expected to vote on a plan that would allow struggling homeowners to try to renegotiate their mortgages in bankruptcy court if they can’t get help from banks or lenders. Meanwhile, banks and lenders and homeowners are getting help from President Obama’s $75 billion-dollar housing rescue plan; but not every bank and not every homeowner.

Nicolas Retsinas, director of the Joint Center for Housing Studies at Harvard, joins "Here and Now" to sort out who will be able to get help with their mortgages and who won’t.

Retsinas describes the first group of homeowners who will get help from the housing rescue plan: "The loan refinancing portion applies to borrowers whose loans are already owned or guaranteed by the government sponsored enterprises Fannie Mae and Freddie Mac, and they need to be current on their mortgage payments. However, we’re in a situation where they are not able to take it to refinance and take advantage of lower interest rates because their house has depreciated in value, and now the new mortgage — the refinance mortgage they might apply for — would exceed the current limits."

These homeowners can get lower interest rates, but they have to have the income to handle the payments, they have to owe no more than $729,750.00, and the homes must be owner-occupied.

The $75 billion in President Obama’s plan is going largely toward the second group of homeowners — these are the people at risk, their home values have also dropped, but unlike the first group, they can’t make their payments and are at risk of going into foreclosure.

For this second group, Retsinas says: "What the government is saying for this program — again limited to owner occupants, limited to individuals with mortgage balances that don’t exceed … the $729,000 … if the lender reduces the payments to a figure that would equal 38% of income, the government will then provide an additional subsidy, matching additional lender modification to get that payment down to 31%. This is predicated — and it’s a very, very important premise — that if you can afford to pay your mortgage, you will pay your mortgage even if you owe more than what your home is worth."

The government is going to give a thousand dollars to the banks who adjust these loans — lower the interest rates, postpone payment of the principal, extend the loan. The borrower gets the lowered interest rate, but they must show the mortgage is no longer affordable because of a change in income or expenses.

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