Scammers have been quick off the mark to start making money out of those who can least afford to pay. Within 24 hours of President Barak Obama announcing details of initiatives to bail out US homeowners ^[1] facing repossession.

A web site dedicated to advising US homeowners on whether they qualify for help is warning borrowers to beware of ‘consultants’ charging for foreclosure rescue, as help is free.

The site: www.financialstability.gov ^[2] explains

• Assistance is free
• No one should pay any fees for housing counselling services or modification of a delinquent loan.
• No one should  sign over property deeds to any organization or individual unless they are working with your mortgage company to forgive your debt.
• Not to make mortgage payments to anyone other than your mortgage company without their approval.

The warning goes to show that even in times of dire need, scammers are ready to make a quick buck off the back of the neediest in the US.

Perhaps this goes to show that the US business ‘greed’ culture that nurtured the recession and was jealously copied in the UK needs to be addressed before the world can make any real progress towards financial stability.

The Homeowner Affordability and Stability Plan ^[3] has two initiatives designed to help struggling homeowners.

Fixed Rate Loans

The first is aimed to help borrowers in financial trouble refinance to a fixed rate loan

To qualify, borrowers must not be in arrears and their mortgages must be with the state-backed mortgage companies Fannie Mae or Freddie Mac.

The scheme does not reduce the amount of the loan but the interest due.

The second initiative is to help lower repayments for homeowners at risk of losing their home by ‘modifying’ the loans they have.

Mortgage Modifications

Borrowers can be in arrears and still qualify.

Mortgage modifications work by reducing interest rates. While not a fixed rate, the new interest rate lasts five years. After that, the rate rises.

This initiative eliminates second mortgage debt.

The big questions is despite the hype around the President’s plans to reduce the effects of recession in the US, will this scheme actually help?

The latest figures 20% of borrowers are in negative equity and more than 10 million homeowners are struggling with their loans.

An additional 2 million borrowers are within 5% of negative equity and expect to slide in to the red over the next month or so.

These are the borrowers the President is targeting with his scheme.

The announcement says that the scheme hopes to help between 7 and 9 million people – but that’s already less than the amount who are in mortgage trouble and the US property market shows no signs of pulling out of its nosedive anytime yet.