By capping monthly payments to no higher than 38% of the owners monthly income as well as offering lenders incentives that could bring this down to 31%, property values and interest rates as well as homeowners spending power will hopefully equalize over the course of the 5 years, which is how long this loan will last. No refinancing will result in an interest rate lower than 2% though.

This is a bold move which hopes to bring us out of a long winded recession that has been creeping up on us through out the Bush administration. There are some cities such as Boston and Seattle where the price of a house is too high for many average working people to afford. I personally know of many who have left there home towns for precisely this reason. These people did not want to move away but the amount and quality of housing for the same price in other states far outweighed their desire to sweat it out in their home towns.

To be eligible for a bad credit mortgage refinance under this stimulus plan the homeowner must:

• Have at least 20% equity in their home
• Be in default or at risk of becoming default
• Be the occupant of the house
• Prove that they have enough income to pay off the loan

Those who are not eligible:

• Investors who bought house as an investment
• Owners of a house that has dropped in value more that 5%
• Those who have a Jumbo mortgage
• Those who lied about their income on the application

One other requirement is that if your total debt is over 55% or your income you will be eligible but you will have to go to debt counseling.

Once qualified, any borrower who is prompt with their payments will also receive a $1000 bonus every year for the 5 year life of this loan.

No matter how you look at it, this is a great deal for anyone with a bad credit mortgage. Obama’s plan may or may not have a nation wide effect of  improving our economy however, in comparison to any other type of bad credit mortgage refinance loan, this one is a winner.