Reduced payments as part of modified mortgages agreed to by credit unions and other loan servicers would stay in place for five years, according to the details of the Obama administration's housing assistance plan released today.
The loan rate would be capped for the life of the loan and the goal of rewriting the terms of the mortgage is to reduce the percentage of income a family pays for its mortgage to 31%.
Participation in the program is voluntary but the government is providing financial incentives for loan servicers to participate.
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Servicers would receive $1,000 upfront fee and "pay for success" fees of up to $1,000 for each of three subsequent years.
The outline of the plan was announced last month but the details and rules were announced today.
The initiative includes a loan-modification plan that could affect between 3 million and 4 million homeowners and a plan to help between 4 million and 5 million homeowners refinance their homes.
The NCUA and other financial services regulators issued a combined statement praising the program.
"The agencies strongly support the program's goal of promoting sustainable loan modifications for at-risk homeowners that appropriately balance the interests of homeowners, servicers, and investors," according to a statement from NCUA, the Federal Reserve, the FDIC, the Office of Thrift Supervision and the Office of the Comptroller of the Currency.
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