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Help on mortgages: the fine print

The plan outlined by President Bush applies to subprime residential adjustable-rate mortgage loans that have an initial fixed-rate period of 36 months or less and that:

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December 7, 2007

Originated between Jan. 1, 2005, and July 31, 2007.

Are included in securitized pools of mortgages.

Have an initial interest rate that resets between Jan. 1, 2008, and July 31, 2010.

People with such loans will be divided into three categories:

1. Loan payments are current and the borrower probably could refinance into other kinds of mortgages, including FHA, FHA Secure, or readily available mortgage industry products.

What happens: The loan servicer will independently explore refinancing opportunities.

2. Loan payments are current, but the borrower is unlikely to be able to refinance.

What happens: The servicer may freeze the existing interest rate, generally for 5 years following the upcoming reset.

The terms can be modified on a "fast track" if:

The borrower lives in the home.

The loan payment would rise more than 10 percent when the rate resets.

The borrower's credit score falls below a certain level.

If the borrower's credit score does not meet the necessary standards, the loan servicer may use alternate ways of determining income and debt to explore eligibility for the rate freeze.

3. Loan payments are more than 30 days delinquent or have been 60 days delinquent once in the past year.

What happens: The servicer will decide the best way to mitigate losses to the borrower.

These may include reducing the mortgage rate, forgiving part of the principal, temporarily suspending loan payments, sale of the residence, or foreclosure.

For more information:
Hope Now: a government-organized cooperative effort between counselors, investors, and lenders: 888-995-HOPE (888-995-4673) or hopenow.com.

FHA Secure: Government-insured refinancing for credit-worthy borrowers who went into default after their ARMs reset: 800-CALL-FHA (800-225-5342) or fha.gov.

SOURCE: American Securitization Forum

Help on mortgages: the fine print

The plan outlined by President Bush applies to subprime residential adjustable-rate mortgage loans that have an initial fixed-rate period of 36 months or less and that:

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