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On February 18 2009, President Barack Obama announced a $75 billion plan to help stop foreclosures. The Homeowner Stability Initiative
(HSI) will help between 7-9 million homeowners avoid foreclosure by restructuring or refinancing their mortgage. The plan has three components:
- Enable 4-5 million homeowners to refinance.
- Provide loan modifications.
Increase funding to Fannie Mae and Freddie Mac.
What It Means to You
This program will help homeowners before they get behind in their payments. Most banks won't allow a loan modification until the borrower misses three payments. It provides a $1,000 a year principle payment for borrowers who stay current on their payments. It also helps borrowers who are upside down in their mortgages. Most banks won't refinance a mortgage unless the amount owed is less than 80% of the total value of the home. This doesn't help homeowners who have seen the value of their home plummet below the mortgage level. The government will help subsidize the cost to banks of reducing the size of the mortgage. The program will be paid for out of TARP funds.