It's a downward spiral, all too common among many Americans: out of work, out of money and soon out of their homes. But help could be on the way, a new plan that would allow homeowners to stay in their home even if they have no income.
Personal finance editor, Gerri Willis will tell us about this. So what's the proposed program Gerri?
GERRI WILLIS, CNN PERSONAL FINANCE EDITOR: Hi, Kyra.
Yes, it's interesting. The Mortgage Bankers Association of all people came out with this idea for helping people who lose their jobs and lose their income. Remember, this is the old-fashioned way that people lose their homes to foreclosure, they have no income, they can't pay their mortgage.
But what the MBA is suggesting is that mortgage payments get reduced for nine months and then you're re-evaluated every three months. Ultimately, you're going to pay something like a third of your income, 31 percent of whatever you have coming in, even if that's an unemployment check and then ultimately you pay it back because you're put into the president's Making Home Affordable plan.
Now, it's notable here that this program does not work unless Treasury signs on to it. Because what they want to do is borrow money from the Treasury, so again, our tax dollars at work to make loans to people so that they can make this program happen.
Now, it's notable here that the Treasury Department is thinking about a lot of programs to extend to Making Home Affordable program, help more people out there because the jobless has been one of those groups of folks who's been missing in all of this. We haven't had a plan really to help them out.
One of the things Treasury is thinking about right now is banning foreclosure unless there is some kind of effort at a modification; the banker and the borrower sit down and have a real conversation about whether or not that loan can be modified. At the end of the day it looks like Treasury is going to make some kind of decision in the days and the weeks ahead and we'll certainly be following that as it happens -- Kyra.
PHILLIPS: So how does the program compare, Gerri, with other federal initiatives to help out homeowners that have been struggling?
WILLIS: Well, what's interesting about this is Making Home Affordable had a goal of helping some four million people, right? Well, not that many people were helped and in fact, only 116,000 were permanently modified. So we've been trying to find ways that the people can get helped. We tried a lot of different programs, as you remember. We talked about a non-legislative effort that was several years ago.
President Bush had programs that's been very difficult to get traction for a lot of reasons but mostly because this is a very complicated issue. Now faced with the possibility of lot of jobless people losing their homes and even prime rate borrowers coming in another wave of possible foreclosures in the next year or so there's a real pressure for Treasury to find yet another solution to this problem -- Kyra.
PHILLIPS: Gerri Willis, I appreciate it.
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