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2.
What Is The Mortgage Bailout Plan?
The original
Mortgage Bailout Plan in the United States was a proposal from
the Bush administration to resolve the mortgage crisis in the
United States. On December 6th 2007, President George Bush and
Treasury Secretary Henry Paulson unveiled this plan to assist
homeowners who were victims of mortgage loan fraud and confusion.
The plan, however, was not designed to help everyone.
Their plan
did not assist homeowners with fixed rate mortgage loans. Only
homeowners that had adjustable-rate mortgage loans (also known
as ARM loans) qualified to get their mortgage payments lowered.
The criteria was that the home loan must had been received between
January 1st, 2005 and July 31st, 2007, and the homeowner must
had been facing a reset of the interest rate sometime between
January 1st, 2008 and July 31st, 2010. Homeowners within this
range were be eligible to have their interest rate frozen.
The plan
received a lot of criticism from Congress and others. However,
President Bush insisted that even though it's called a "bailout"
- its not a burden to taxpayers, and the U.S. government is
not shelling out any money. Bush said that the plan just regulated
the "teaser rates" that banks have been giving to
homeowners. With this particular Mortgage Bailout plan, their
interest rates could no longer increase causing the homeowners
monthly payments to balloon.
This plan
did help some families, but not enough.
On February
18, 2009, the Obama administration announced another mortgage
bailout plan that would allocate $75 billion from the Financial
Stabilization Fund. This money would be given directly to banks
and lenders - allowing them to facilitate modifications in existing
loans, and adopt foreclosure prevention protocols to prevent
unnecessary foreclosures. This plan, different from Bush's plan,
would help homeowners with ARM loans and homeowners with
fixed rate loans.
Many experts
were critical about this plan because it does not put money
into the pockets of the actual homeowners. Whether or not it
works, time will tell. If it does work, however, it could help
up to nine million American families who are struggling to make
their monthly mortgage payments.
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