Thursday, November 13, 2008

Help For the Little Guy

With all the billions going to the banks and AIG, it seems there was very little help going to the average person. All the big plans didn't involve directly helping those people in danger of loosing their homes. Now finally there is some help.

First and foremost what took so long.

You can read more about it from the Post here.

The upshot is that the terms of the mortgages are being renegotiated. The two big mortgage companies Fannie Mae and Freddie Mac are at the forefront of this. This program will help out people who are 90 days behind in payments. It will lower the interest rate and extend the time of the loan from 30 years to 40 years. In some cases some of the principal owed on the loan will be deferred.

The idea is to keep people in their homes. With so many foreclosures, they are up 25% this year, it doesn't make sense to have even more people default on their loans. After all the banks aren't going to be able to unload these house if they end up owning them. Also the more foreclosures the more this drives down the value of homes. That only helps to perpetuate the cycle.

Some banks are taking a similar approach but with one big change. They are not waiting until a homeowner is 90 days behind. The banks are contacting homeowners they feel might run into problems and working something out before that point is reached.

Again what took so long.

Congress will be holding hearings today on the bail out. They will specifically be asking banks that received the money why they aren't doing more to help consumers.

About time Congress actually did its job.

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