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January 22, 2014 By
Governor Cuomo Backs New Mortgage Proposal
Governor Andrew Cuomo stated this initiative will help keep families in their homes and out of foreclosure, while at the same time reducing potential loses for investors. He went on to further state with regard to this new proposal “that’s good for homeowners, good for local neighborhoods, and good for the long term strength of the housing market.”
Unfortunately, pursuant to existing federal rules and regulations, the large majority of home loans in New York cannot qualify under this program. This is because Fannie Mae and Freddie Mac, the two federal agencies which purchase mortgages for approximately two-thirds of all home loans in the State of New York, do not allow forgiving outstanding mortgage balances.
The new proposed program would be available to homeowners who owe more on their homes than their homes are worth and have tried to obtain mortgage modifications and have been unsuccessful. Under this program, banks would provide disclosure to the homeowners concerning the terms of the new loan modifications and how much of the profits the bank would receive upon the sale of the home. The proposal would limit the bank to either 50% of the increase in value in the home or the total amount forgiven under the mortgage, whichever is less.
Homeowners Reluctant to Share in Appreciation
Interviews with a number of homeowners with regard to this new proposal, indicated they were reluctant to share in the appreciation of their homes with banks.
Conclusion
The program is an excellent idea. Homeowners whose homes are under water and are behind on their mortgage would be given a second chance to stay in their homes and have their mortgage modified to a realistic amount they could afford.