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Introduction To The Homeowner Stability Initiative


February 2009 provided a history making plan passed by President Barack Obama. This plan is to help stop those who are potentially facing foreclosure. The name of the act was the Homeowner Stability Initiative (HSI). This plan was designed to help millions of homeowners avoid foreclosure.

There are three (3) aspects to this plan that are designed to help.

1. Refinance

Because of the decline in home values, millions of people now owe more on their home than it is worth. Most banks are not willing to refinance these homes. A standard mortgage loan allows a maximum refinance amount of 80% of the home's value. It is simple to see using these numbers that those who owe more than their home is worth would have difficultly refinancing.

If you are one of the millions of homeowners who have a mortgage with Freddie Mac or Fannie Mae guarantees you may be eligible to refinance your home at a lower interest rate. For most, this will mean lower monthly payments and an increased ability to pay their mortgage.

2. Loan Modifications

This plan helps reduce monthly mortgage payments for homeowners. All homeowners are aware of the requirement of Debt to Income Ratio that is calculated when they mortgage their home. Standard Debt to Income ratios are approximately 1/3 of the homeowners income. This aspect of the plan will offer reduced mortgage payments that are equivalent to 31% of income.

The plan is for the interest rate reduction to assist the homeowner for a period of five years. If a borrower stays current on their mortgage, the Treasury Department will supplement the mortgage payments at a rate of $1,000 annually. This will be used to reduce the principal amount of the loan.

3. Funding to Fannie Mae and Freddie Mac

Fannie Mae and Freddie Mac will be provided additional funding through the purchase of $200 billion in preferred shares. This change will allow more people to receive loans and loan guarantees for their mortgages. This portion of the bill will be paid for from existing funds versus from new funds.

Homeowner Stability
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Homeowner Stability Initiative Offers Renters Relief

Many renters have been victims of the sub-prime mortgage crisis resulting in sudden relocation. Many neighborhoods are becoming vacant and distressed because of this. Part of the program will fund a Neighborhood Rehabilitation Fund that prevent neighborhoods with high vacancies due to foreclosures avoid becoming distressed.

HSI's Advantages for Banks

Banks and mortgage lenders will be able to take advantage of several benefits from this program should they elect to participate. These incentives include:

- Subsidizing of losses as a result of modifications
- Lenders will receive up to $1500 for each loan they modify before the borrower falls behind
- Loan Servicing companies will receive up to $500 for each modification prior to the borrower falling behind
- Loan Servicing Companies will receive $1000 for each successful loan modification and are eligible for an additional $1,000 for three (3) years if the loan stays viable

These incentives will be paid for by the exiting Troubled Asset Recovery Program funds.


Millions of homeowners may have received a new lease on their mortgage due to the homeowner stability initiative (HSI). This will certainly help them stay in their homes if they are potentially facing foreclosure.

(Source: Treasury Department, Homeowner Affordability and Stability Plan, February 18, 2009)

See also: HOPE NOW, government refinancing




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