Bush's proposed plan separates the subprime crisis into three categories: those who can pay their bills, those who may not be able to pay their bills in the near future or if interest rates rise, and those who are already struggling to pay their mortgage. This particular proposal is aimed at those who are making payments at the moment, but may struggle to pay their bills sometime soon. "It's controversial," says AuWerter. "It's slicing down this universe, and it's very hard to do that [with] the criteria they're using."
What the plan will do is freeze current interest rates for those people for the next five years. "It gives you a little bit of breathing room," says AuWerter. "But at the same point, you are probably already struggling financially." The criteria to qualify include having no more than 3% equity in your home, a credit score of 660 or lower, and your credit score must not have risen more than 10% since you took out your mortgage.
"My advice here is, do take advantage of it, get that extra breathing room, but you probably do need to come up with a new game plan because you don't want to just sit in this house for 5 years when you're just barely scraping by," says AuWerter.
However, you'll be disqualified from taking part in the plan if you've missed any payments. "If you're facing foreclosure, there really... aren't a lot of great solutions," says AuWerter. She suggests calling the Homeownership Preservation Foundation at 888-995-HOPE and exploring your options. "I think a lot of folks want to hide when they're struggling with their payments and that's just not going to do any bit of good," says AuWerter.
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By Erin Petrun