Regulators are carrying out an experiment that could change the course of the financial crisis by tackling the home foreclosures that are at its root. They are attempting to create a model for reworking mortgages and rescuing homeowners (a/k/a loan rescheduling). This practice has been going on for years in the hallowed halls of government and big corporations.
So the basis of this idea is: plug the homeowners' incomes into a formula to determine how much they can afford to pay (about 38 percent of their gross monthly income). The regulators first try to reach that payment level by lowering the interest rate. If that doesn't work, they then extend the term of the loan to 40 years. If that also is insufficient, homeowners might pay interest on only a portion of the principal.
Why did none of the lending institutions offer this option earlier? This may have helped avoid all this financial upheaval on global markets.
But it sounds like a good plan and nothing is perfect. If a person can't handle a normal fixed rate mortgage with extended terms, sell the house to someone who can. The irony is that the second buyer will get the house for half price.
Good luck!
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment