Despite rumors that the program would be “killed” due to budget restrictions, the Mortgage Rescue Scheme is still alive and kicking thanks to 200 million pounds earmarked for its funding during the next two years. This popular although underused program is designed to help low-income and vulnerable families avoid repossession by either buying their homes and renting them back at a reduced price or by buying a percentage of the home and reducing the mortgage payments. However, March 2011 has seen some changes brought on the 2009 program specifications. If you are considering applying for a mortgage rescue program, these changes will affect you. However, if your application has already been processed by a registered provider, these changes will not apply to you.

Purchase Rate Changes

The main change to the program is in the purchase rate the Government requires registered providers to buy your home at. Previously, registered providers were required to pay 97 percent of the market value of your home. Now this rate has been reduced to 90 percent. This translates in huge savings to lenders and providers. To illustrate, if your property has a market value of 100,000 pounds you would have previously received an offer of 97,000 pounds for your home. Now, if your application is approved, you will receive a maximum of 90,000 pounds. This means homeowners will lose 7,000 pounds for every 100,000 pounds their property is worth.

The Purpose

Why has the Government reduced the purchase rate of homes whose market value in most cases has already dropped from its previous levels? The purpose is to ensure more people can qualify for the program and receive the help they need. However, the reduction in purchase rate does bring into question if this scheme is that helpful. The answer is this question is certainly a good option for homeowners who are in negative equity and want to keep their homes. However, if you have some equity on your home, this reduction may cause homeowners to reconsider if the Mortgage Rescue Scheme is in their best interest. Notice there are other options for homeowners, especially those whose homes are not yet underwater. This solutions include loan modifications with lenders, mortgage refinancing and other Government programs such as the Support for Mortgage Interest program.

If you are at risk of losing your home, contact your local housing authority and ask for a non-profit and independent debt advice officer and ask for personalized advice on the best program in your situation.

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