Government Refinance Assistance

There was a recent news release over at MakingHomeAffordable.gov on the details of the new program designed to help unemployed homeowners. Fill in the contact form in the sidebar to learn more about the programs that might apply to you. Here is an excerpt from that release:

By August 1, all mortgage servicers participating in the Making Home Affordable Program will offer extra help for homeowners struggling to make their monthly mortgage payments because of unemployment. The Unemployment Program will offer homeowners a forbearance period to temporarily reduce or suspend their monthly mortgage payments while they seek re-employment.

The minimum forbearance period is three months, although a mortgage servicer may extend it depending on the investor and regulator guidelines. If a homeowner becomes re-employed in that time, the forbearance period will end and the homeowner will be evaluated for a mortgage modification under the Making Home Affordable Program. Unemployment benefits will no longer qualify as income for the mortgage modification program.

During the forbearance period, a homeowner’s monthly mortgage payment must be reduced to no more than 31 percent (or less) of their gross monthly income. The servicer can decide to temporarily suspend payments in full. The payment amount and due dates will be decided by the servicer depending on investor and regulator guidelines.

To qualify, a homeowner must meet the following eligibility criteria:

* The mortgage must be a first lien mortgage, originated on or before January 1, 2009, and the unpaid principal balance must be equal to or less than $729,750 for a one-unit property.
* The property must be the homeowner’s principal residence.
* The mortgage has not been previously modified through a Home Affordable Modification.
* The homeowner was ineligible for a Home Affordable Modification.
* The homeowner is either behind on payments (but not by more than three consecutive months) or it is reasonably forseeable that the homeowner will fall behind.
* The total monthly mortgage payment is greater than 31 percent of the homeowner’s gross monthly income. If the payment is less, it is up to the servicer’s discretion if they will offer the program to the homeowner.
* The homeowner will be unemployed at the start of the forbearance period, and is able to document this because they will be receiving unemployment benefits in the month the forbearance period begins (even if the benefits expire before the forbearance period ends).

A mortgage servicer may require that, based on investor and regulator guidelines, homeowners have received at least three months of unemployment benefits before they begin a forbearance period.

There is no cost to apply to the Unemployment Program, although late charges may accrue while the homeowner is being evaluated for the program or in the program. A mortgage servicer may not collect late charges from the homeowner while they are still in the forbearance period.

The numbers of permanent loan modifications through the Home Affordable Modification Program (HAMP) continue to increase. For instance Bank of America recently reported it granted 70,000 permanent loan modifications total through May of this year. We get the following from a HousingWire article on the topic:

Bank of America pushed its total number of permanent modifications under the Home Affordable Modification Program (HAMP) to roughly 70,000 in May, up from 56,400 in April.

BofA reported more than 630,000 modifications through all of its programs since January 2008. The Treasury Department launched HAMP in March 2009 to provide incentives to servicers for the modification of loans on the verge of foreclosure. Borrowers must make three monthly payments under a trial modification and provide all financial documents to the servicer before it becomes permanent.

In April, servicers reported more than 300,000 permanent modifications under HAMP. Earlier in June, BofA began reducing principal for some qualifying underwater borrowers as part of the modification process.

Fill in the contact form in the sidebar to learn more about which program you could take advantage of.

The announced enhancement to the Obama loan Home Affordable Modification Program (HAMP) is set to roll out on July 1 of this year. Contact us in the sidebar to get advice on your situation. We get this from a recent CNNmoney article on the early results from the program:

Separately, the administration plans to roll out its new program for the unemployed on July 1. Eligible borrowers could enter a forbearance program, which either suspends their monthly payments entirely or reduces them to less than 31% of their pre-tax household income.

Later in the year, two more initiatives will begin. One will encourage servicers to lower loan balances for delinquent borrowers when that is more advantageous to mortgage investors than reducing interest rates.

Principal reduction would be available for eligible borrowers who owe more than 115% of their home’s current value. The balance would be forgiven as long as the homeowner makes timely payments for three years.

The other initiative will allow some borrowers who are current on their mortgages but have seen their property values drop to refinance into Federal Housing Administration loans worth no more than 97.75% of their home’s price. The program is set to start in the fall.

If the borrower has a second lien, the total mortgage debt could not exceed 115% of the property’s value. Homeowners, however, must meet FHA’s qualifications and have a credit score of at least 500. Their new monthly payments would be no more than 31% of their monthly income.

Here are some more interesting excerpts from the recent press release on the progress of the HAMP program:

At the time we launched HAMP in March 2009, President Obama said that the program would “enable as many as three to four million homeowners to modify the terms of their mortgages.”

* The target of “three to four million homeowners” includes both agency loans (owned or guaranteed by the Government-Sponsored Enterprises, Fannie Mae and Freddie Mac) and non-agency loans.
* We have continued to report offers of trial modifications, because the offer is the servicer’s commitment to extend a trial modification subject to the borrower’s agreement. At this point, a homeowner is provided an opportunity to reduce his or her monthly mortgage payment.
* There will be fewer permanent modifications than trial modifications, as modifications are only offered permanent status once the homeowner has accepted a trial modification, has performed for at least three months in a trial modification, and has met the full documentation requirements for the permanent modification. By requiring borrowers to demonstrate their ability and willingness to meet their monthly obligations, the trial modification helps ensure that taxpayer dollars are not spent on unsustainable modifications.
* Loan modifications have a risk of re-default. Among the permanent modifications, some will re-default and that factor is incorporated into the program’s design.
* In fact, we designed our program specifically to protect the taxpayer in cases where re-default occurs – payments to servicers, investors, and borrowers are conditional on actual performance over time.
* The projection of three to four million homeowners helped is based on our best estimate of the number of HAMP-eligible households that are likely to require assistance during the four-year program. The number of households that actually require assistance from HAMP during the remaining three years may diverge from our expectations if economic conditions or home prices evolve differently than projected.

More than 1.4 million borrowers have been extended a modification offer, with approximately 1.2 million of these approved offers resulting in modification trials. In a program scheduled to last nearly four years (March 2009 through December 2012), either figure places the program well on schedule to meet the goal announced by President Obama.

Contact us in the sidebar to discuss your situation.

There was a pretty useful press release at the MakingHomeAffordable web site recently. It has a lot of information but here are a few highlights:

Actions Helping Homeowners Purchase Homes, Refinance and Modify Mortgages to More Affordable Payments, Prevent Foreclosures and Stabilize Communities

The Administration has:

* Launched a modification initiative to help homeowners reduce mortgage payments to affordable levels and to prevent avoidable foreclosures. Homeowners in active modifications are saving around $500 per month on average;
* Supported temporarily expanding the limits for loans guaranteed by Fannie Mae, Freddie Mac, and FHA from previous limits up to $625,500 per loan to $729,750 to provide needed support to keep markets functioning during this crisis;
* Expanded refinancing flexibilities for the Fannie Mae and Freddie Mac loans, particularly for borrowers with negative equity. Combined with historically low mortgage rates, this has helped more than four million American homeowners to refinance, saving an estimated $150 per month on average and more than $7 billion cumulatively in the past year;
* Launched a $23.5 billion Housing Finance Agencies Initiative which is helping more than 90 state and local housing finance agencies (HFAs) across 49 states provide sustainable homeownership and rental resources for American families;
* Supported the First-Time Homebuyer Tax Credit, and the subsequent extension and expansion of the credit to also assist move-up buyers, which has helped hundreds of thousands of responsible Americans purchase homes.
* Through the Recovery Act, provided over $5 billion in support for affordable rental housing through low-income housing tax credit programs and $2 billion in additional support for the Neighborhood Stabilization Program (NSP), on top of the first round of $4 billion of NSP funds, to restore neighborhoods hardest-hit by concentrated foreclosures; and
* On February 19, 2010, announced the $1.5 billion HFA Hardest-Hit Fund for five state HFAs in the nation’s hardest-hit housing markets to design innovative, locally targeted foreclosure prevention programs. On March 29, 2010, we announced a $600 million expansion of that program for an additional five HFAs.

Together, these initiatives are having an impact – strengthening the housing market, helping responsible homeowners prevent avoidable foreclosures and rebuilding communities and neighborhoods. Today mortgage rates remain near historic lows – the primary interest rate is now about 5.20 percent. We are also seeing encouraging signs in housing indicators – home prices and the pace of home sales have stabilized in recent months.

Contact us in the sidebar if you would like to discuss your situation.

As industry insiders have known for a long time, when it comes to getting a loan modification working with a bank tends to be easier than working with a loan servicing company. This is partially because loan servicing companies have less authority to make decisions about modifications. But it is also partially due to laziness and/or ineptitude in other cases. Treasury Secretary Timothy Geithner promised to do more to crack down on loan servicers that aren’t doing enough to help people avoid foreclosure. Here is a bit from a recent Reuters article on the topic:

U.S. Treasury Secretary Timothy Geithner on Thursday slammed mortgage service companies for failing to do enough to help Americans avoid losing their homes and promised to crack down on shoddy practices.

“We do not believe servicers are doing enough to help homeowners — not doing enough to help them navigate the difficult and frightening process of avoiding foreclosure,” Geithner said in prepared remarks for delivery to a Senate appropriations subcommittee.

He said Treasury was “troubled” by reports that servicers had done things like foreclose on homeowners who were potentially eligible for relief under the government’s Home Affordable Mortgage Program, lost documents or claimed to have done so and even steered troubled homeowners away from available assistance.

“None of this is acceptable,” Geithner said, adding that Treasury was doing “targeted, in-depth compliance reviews” to make sure that servicers were acting in good faith.

See this document published over at MakingHomeAffordable.gov. It outlines the new FHA plans for underwater homeowners. Here are some excerpts from the document:

Today the Administration announced adjustments to Federal Housing Administration (FHA) programs that will permit lenders to provide additional refinancing options to homeowners who owe more than their home is worth because of large falls in home prices in their local markets. These adjustments will provide more opportunities for qualifying mortgage loans to be responsibly restructured and refinanced into FHA loans as long as the borrower is current on the mortgage and the lender reduces the amount owed on the original loan by at least 10 percent. This option should be available by the fall.

The new program is contingent on lenders voluntarily writing down the principal balance on these loans. It is not clear yet how many lenders will be interested in doing that or what specific incentives the new program will give the lenders to participate. We will continue to update you here as more information comes out.

There was an interesting article in the LA Times recently about the declaration of some lawmakers and a watchdog group that the Obama loan modification program, the home affordable modification program (HAMP) has been a failure. The White House promised several changes to the program to improve it. Here are some excerpts from that piece:

Among the changes to take effect June 1 is a requirement that companies servicing mortgages must prescreen every borrower who has missed two or more payments to determine whether he or she is eligible for the Home Affordable Modification Program. If so, the servicer “must proactively solicit those borrowers” to participate. Those companies also are required to make quicker decisions about eligibility and speedily process documents.

And the program is being expanded to include borrowers who have filed for bankruptcy protection.

Assistant Treasury Secretary Herbert M. Allison Jr. announced the changes at a hearing about the program by the House Oversight and Government Reform Committee. Lawmakers from both parties have been critical of the program’s effect on home foreclosures. …

Rep. Darrell Issa (R-Vista) was more blunt. He said the program had been a failure and actually had increased the pain for some homeowners who had been given the false impression that their mortgage payments could be permanently lowered.

“People are making payments in hopes that it would lead to a solution, when it appears as though a great many of them should be looking for more affordable alternate housing,” Issa said.

The Obama refinance program for people with loans backed by Fannie Mae or Freddie Mac (also known as the Home Affordable Refinance Program) just increased the loan-to-value it will allow from 105% of the appraised value of the home to 125%. While this is good news for borrowers we will have to wait and see which lenders are actually willing to participate in the new program. Many lenders were only allowing up to 95% on the program even though it previously allowed for more so we will see which lenders allow for 125% in practice. Here is a link to the announcement and here are some excerpts:

U.S. Housing and Urban Development Secretary Shaun Donovan today announced an expansion of the Obama Administration’s Home Affordable Refinance Program to include participation by borrowers who are current but up to 125 percent underwater on their mortgage. Under authorization provided by the Federal Housing Finance Agency, borrowers whose mortgages are currently owned or guaranteed by Fannie Mae and Freddie Mac will now be allowed to refinance those loans according to the terms of the Home Affordable Refinance program established earlier this year.

…

Currently, only those borrowers whose first mortgage does not exceed 105 percent of the current market value of the property are eligible for the Obama Administration’s Home Affordable Refinance Program. For example if the property is worth $200,000, the borrower must owe $210,000 or less. Today’s announcement will allow more homeowners to become eligible for the program, by increasing the eligibility to 125 percent.

Here is the pdf of the fact sheet on the new program announced yesterday to help people modify their second mortgages. Below are some important excerpts:

We estimate up to 50 percent of at-risk mortgages currently have second liens. By offering homeowners a way to lower payments on their second mortgages through our Second Lien Program, we may potentially reduce payments further for up to 1 to 1.5 million homeowners, accounting for up to 50 percent of participants in the Home Affordable Modification Program, as well as maximize the effectiveness of our first lien modification program. The program ensures that first and second lien holders are treated fairly and consistent with priority of liens.

…

These new details on the Second Lien Program and the integration of Hope for Homeowners mark ongoing progress of the Making Home Affordable Program in improving mortgage affordability for responsible homeowners and keeping more Americans in their homes.

…

For amortizing loans (loans with monthly payments of interest and principal), we will share the cost of reducing the interest rate on the second mortgage to 1 percent. Participating servicers will be required to follow these steps to modify amortizing second liens:

- Reduce the interest rate to 1 percent;

- Extend the term of the modified second mortgage to match the term of the modified first mortgage, by amortizing the unpaid principal balance of the second lien over a term that matches the term of the modified first mortgage;

- Forbear principal in the same proportion as any principal forbearance on the first lien, with the option of extinguishing principal under the Extinguishment Schedule;

- After five years, the interest rate on the second lien will step up to the then current interest rate on the modified first mortgage, subject to the Interest Rate Cap on the first lien, set equal to the Freddie Mac Survey Rate;

- The second mortgage will re-amortize over the remaining term at the higher interest rate(s); and

- Investors will receive an incentive payment from Treasury equal to half of the difference between (i) the interest rate on the first lien as modified and (ii) 1 percent, subject to a floor.

For interest-only loans, we will share the cost of reducing the interest rate on the second mortgage to 2 percent. Participating servicers will be required to follow these steps to modify interest-only second liens:

- Reduce the interest rate to 2 percent;

- Forbear principal in the same proportion as any principal forbearance on the first lien, with the option of extinguishing principal under the Extinguishment Schedule;

- After five years, the interest rate on the second lien will step up to the then current interest rate on the modified first mortgage, subject to the Interest Rate Cap on the first lien, set equal to the Freddie Mac Survey Rate;

- The second lien will amortize over the longer of the remaining term of the modified first lien or the originally scheduled amortization term, with amortization to begin at the time specified in the original contract;

- Investors will receive an incentive payment from Treasury equal to half of the difference between (i) the lower of the contract rate on the second lien and the interest rate on the first lien as modified and (ii) 2 percent, subject to a floor.

A gaping hole in most of the mortgage assistance programs to date has been the problem of second mortgages. While the current programs deal with first mortgages in a number of ways none of them dealt specifically with second mortgages — particularly in cases when the homeowner is underwater/upside-down (owes more than the home is worth) or late on the mortgage already. The Obama administration announced the first attempted remedy of that problem today.

Here are some quotes from a WSJ blog on the announcement:

The Obama administration unveiled a fresh set of incentives Tuesday for mortgage servicers to help strapped U.S. homeowners.

Under a new program, the government will pay mortgage servicers $500 up front and $250 a year for three years for successfully modifying a second mortgage, such as a home equity loan.

Second mortgages have complicated government efforts to help borrowers avoid foreclosure. According to the U.S. Treasury Department, up to 50% of at-risk mortgages have second liens and many properties in foreclosure have more than one lien.

One of the more surprising revelations from last week about the Obama Fannie/Freddie program is that it does not apply exclusively to primary residences. Rather, it applies to any home that is backed or insured by Fannie or Freddie.

Of course to take advantage of one of the new Home Affordable Refinance loans a borrower needs to be a rare breed:

- Credit scores above 680
- Plenty of income to easily afford the mortgage payments
- No second mortgage on the home (lest you incur a huge penalty)
- At least break even on the equity

I’m not sure where the administration is getting the 3-4 million homeowner number who will reportedly benefit from this refi portion the new plan, but with those kinds of restrictions it is hard to believe anywhere near that many homeowners will fit the mold.

Perhaps they are counting on the loan modification portion helping most of the people instead…

Fannie Mae and Freddie Mac put out some details for lenders on the new Home Affordable Refinance program. (The full documents can be found here.) As has been announced, the Home Affordable Refinance program is the part of the Obama refinance plan for borrowers who are not in trouble but who, because of home values dropping, have less than 20% equity and thus cannot refinance into the low interest rate loans that are available now. See here for the things that still disqualify borrowers from refinancing. Borrowers who cannot refinance can request a loan modification from their current lender(s).

Here are some interesting tidbits about the new Home Affordable Refinance program:

1. If your middle credit score is below 680-700 the risk-based pricing will likely preclude you from this particular program. The FHA program is still available for borrowers who have credit scores from 620 to 700.

2. If you owe more on your first mortgage than your home is worth this program will probably not work. While the program allows for you to refinance your first for up to 105% of the current value of the home, that extra 5% is mostly there to cover closing costs on the refinance loan.

3. If you have a second mortgage the fees associated with a Home Affordable Refinance may make the program untenable. The program allows you to refinance the first mortgage and keep your second mortgage in place but there are substantial pricing penalties if the amount of your first and second mortgage combined is greater than 95% of the current value of the home. Note: If your first and second add up to more than the value of your home you can still refinance the first mortgage through the FHA program with no penalties as long as the second mortgage holder is willing to subordinate their loan (meaning willing to remain in second lien position).

4. If your mortgage does not have mortgage insurance now your new Home Affordable Refinance loan does not need mortgage insurance either even if your loan to value is greater than 80%. However if you do have mortgage insurance now that insurance is supposed to transfer to the new loan under the program.

5. The program won’t really kick in until April by most accounts. While Fannie and Freddie have announced the guidelines it will take a while for the banks and investors to ramp up and be ready to start funding the new loans.

Please contact us or comment below with any other questions.

The Obama released some of the details of the Making Home Affordable plan today with not many surprises. See the guideline summary pdf here.

The plan is split into two parts; the first is for refinances and the second, larger part, is for loan modifications. The refinance portion is dubbed The Home Affordable Refinance and it is the portion our group focuses on. Here are some of the basic qualification questions for The Home Affordable Refinance program:

1. Is your home your primary residence?
2. Do you have a Fannie Mae or Freddie Mac loan? If you don’t know contact:
* Fannie Mae, 1-800-7FANNIE (8am to 8pm EST). www.fanniemae.com/homeaffordable
* Freddie Mac, 1-800-FREDDIE (8am to 8pm EST). www.freddiemac.com/avoidforeclosure/
3. Are you current on your mortgage payments?
* “Current” means that you haven’t been more than 30-days late on your mortgage payment in the last 12 months.
4. Do you believe that the amount you owe on your first mortgage is about the same or less than the current value of your house?

If you meet those four requirements a Making Home Affordable Refinance may work for you. If that is the case please contact us by filling in the contact form in the sidebar.

If you do not meet the above requirements then the second part of the plan, The Home Affordable Modification, might apply to you. In order to check on a Home Affordable Modification please contact your current lender or servicer directly.

We here at Government Refinance Assistance have taken to calling the refinances that will become available as a result of President Obama’s newly announced plan “Obama Refinances”. The eligibility details will officially be released on March 4, 2009 but some details are beginning to emerge. One of the most important details is that with Obama Refinances homeowners who refinance into loans of more that 80% of the current value of their home will not be required to pay monthly mortgage insurance on the loan. This is a big deal because on a loan of around $200,000 the monthly mortgage insurance payment could be about $100 per month. Avoiding that will be a real boon to people who are able to take advantage of the new program. Not only will they get the great rates we are seeing now (in the low 5s in most cases) but they will be able to do so without costly mortgage insurance. That is something that neither regular conventional refinances nor FHA refinances can offer.

Here are some quotes from a recent Seattle Times article on the subject:

Under the Obama plan, borrowers who have made their monthly payments on time but are saddled with interest rates well above current prevailing levels in the low 5 percent range may be eligible to refinance — despite decreases in their property values.

Neither Fannie Mae nor Freddie Mac typically can refinance mortgages where the loan-to-value (LTV) ratio exceeds 80 percent without some form of credit insurance. That insurance can be difficult or impossible to obtain in many parts of the country that insurers have labeled “declining” markets, with high risks of further deterioration in values.

In effect, large numbers of people who bought houses several years ago with 6.5 percent or higher 30-year fixed rates cannot qualify for refinancings because their LTVs exceed Fannie’s and Freddie’s limits.
…

In a letter to private mortgage insurers Feb. 20, Fannie and Freddie’s top regulator confirmed that there would be no requirement for refinancers to buy new mortgage insurance, despite exceeding the 80 percent LTV threshold.

James B. Lockhart III, director of the Federal Housing Finance Agency, described the new refinancing opportunity as “akin to a loan modification” that creates “an avenue for the borrower to reap the benefit of lower mortgage rates in the market.” Lockhart spelled out several key restrictions on those refinancings:

• No “cash outs” will be permitted. This means the new loan balance can only total the previous balance, plus settlement costs, insurance, property taxes and association fees.

• Loans that already had mortgage insurance will likely continue to have coverage under the existing amounts and terms, thereby limiting Fannie and Freddie’s exposure to loss. But loans where borrowers originally made down payments of 20 percent or higher will not require new insurance for the refi, despite current LTVs over the 80 percent limit.

• The cutoff date for the entire program is June 10, 2010.

Speculation is flying freely about the pending eligibility details of the Obama homeowner rescue plan. Here is an article that suggests the plan and FHA may have stipulations to help people who have been laid off.

On Tuesday, a government housing official told a U.S. House of Representatives panel that the Obama administration is currently working on a way to offer more home loan relief to the unemployed, Dow Jones Newswires reports.

These plans may include permission for the Federal Housing Administration to help households in which a breadwinner has been laid off due to the recession, Vance T. Morris, Housing and Urban Development director for single family asset management, told the panel.

We get this from a recent Washington Post article:

A day after President Obama unveiled his $75 billion foreclosure prevention program, administration officials yesterday said they were still determining which homeowners should qualify.

The administration is developing a standard for lenders to use in evaluating applicants that seeks to exclude homeowners who are not in real need or are too far behind in their payments to be saved. Officials have set some conditions for eligibility, including requiring that borrowers’ mortgage payments consume more than 38 percent of their income and that the property be a primary residence.

Government officials are working to finalize details before a self-imposed March 4 deadline when the program will go into effect and lenders are likely to be flooded with calls.

…

Even as the administration finalizes details of the mortgage modification program, officials are getting pressure from some groups to include protection for lenders and mortgage servicers that rework a loan and worry they could face a lawsuit from investors.

The Mortgage Bankers Association is also trying to persuade the administration to expand the refinancing portion of the plan. Under that program, the administration will loosen lending standards at Fannie Mae and Freddie Mac to allow millions of homeowners to qualify for refinanced loans as long as their mortgages do not exceed 105 percent of the current value of their property. But with housing prices in a free fall in parts of the country, including Florida, California and Arizona, that will not be enough for many homeowners.

“We think that 105 percent [loan-to-value ratio] should be revisited,” said Steve O’Connor, senior vice president for government affairs at the mortgage bankers’ group.

Part 1 of the new Obama housing plan is for borrowers who are having difficulty refinancing but not is serious trouble yet. Part 2 is the loan modification segment of the plan for folks who can’t qualify for part 1 because of bad credit, being behind on the mortgage payments, or being too far upside down on the property to qualify for part 1. We get these talking points from this document about part 2 to the new Obama plan:

Borrowers Who Are at Risk of Foreclosure Are Asking:

1. What help is available for borrowers who are at risk of foreclosure either because they are behind on their mortgage or are struggling to make the payments?

The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.

2. Do I need to be behind on my mortgage payments to be eligible for a modification?

No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.

3. How do I know if I qualify for a payment reduction under the Homeowner Affordability and Stability Plan?

In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.

4. I do not live in the house that secures the mortgage I’d like to modify. Is this mortgage eligible for the Homeowner Affordability and Stability Plan?

No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.

5. I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?

Yes. Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one unit as your primary residence.

6. I have two mortgages. Will the Homeowner Affordability and Stability Plan reduce the payments on both?

Only the first mortgage is eligible for a modification.

7. I owe more than my house is worth. Will the Homeowner Affordability and Stability Plan reduce what I owe?

The primary objective of the Homeowner Affordability and Stability Plan is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Lenders are likely to lower payments mainly by reducing loan interest rates. However, the program offers incentives for principal reductions and at your lender’s discretion modifications may include upfront reductions of loan principal.

8. I heard the government was providing a financial incentive to borrowers. Is that true?

Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.

9. How much will a modification cost me?

There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.

10. Is my lender required to modify my loan?

No. Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering substantial incentives and it is expected that most major lenders will participate.

11. I’m already working with my lender / housing counselor on a loan workout. Can I still be considered for the Homeowner Affordability and Stability Plan?

Ask your lender or counselor to be considered under the Homeowner Affordability and Stability Plan.

12. How do I apply for a modification under the Homeowner Affordability and Stability Plan?

You may not need to do anything at this time. Most mortgage lenders will evaluate loans in their portfolio to identify borrowers who may meet the eligibility criteria. After March 4 they will send letters to potentially eligible homeowners, a process that may take several weeks. If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer or a HUD-approved housing counselor. Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.

13. What should I do in the meantime?

You should gather the information that you will need to provide to your lender on or after March 4, when the modification program becomes available. This includes

· information about the monthly gross income of your household including recent pay stubs if you receive them or documentation of income you receive from other sources

· your most recent income tax return

· information about any second mortgage on the house

· payments on each of your credit cards if you are carrying balances from month to month, and

· payments on other loans such as student loans and car loans.

14. My loan is scheduled for foreclosure soon. What should I do?

Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower’s eligibility. We support this effort.

Read the PDF summary of the new Obama Housing plan here. It is found at the HUD site here.

According to the summary the #1 goal of the new program is to help with:

1. Refinancing for Up to 4 to 5 Million Responsible Homeowners to Make Their Mortgages More Affordable

Enabling Up to 4 to 5 Million Responsible Homeowners to Refinance: Mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 80 percent of the value of their homes have a difficult time refinancing. Yet millions of responsible homeowners who put money down and made their mortgage payments on time have – through no fault of their own – seen the value of their homes drop low enough to make them unable to access these lower rates. As a result, the Obama Administration is announcing a new program that will help as many as 4 to 5 million responsible homeowners who took out conforming loans owned or guaranteed by Fannie Mae or Freddie Mac to refinance through those two institutions.

It sounds like this portion of the plan is similar to the FHA streamline program where you can basically streamline your conforming loan to a better rate at a reduced cost. Part 1 of the plan is for people who have a little bit of equity in their homes but not enough to qualify for a conventional loan refinance. The loans in part 1 can refinance up to 105% of the current value of your home. We get this from another worksheet:

3.How do I know if I am eligible?

Complete eligibility details will be announced on March 4th when the program starts. The criteria for eligibility will include having sufficient income to make the new payment and an acceptable mortgage payment history. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.

4.I have both a first and a second mortgage. Do I still qualify to refinance under the Homeowner Affordability and Stability Plan?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.

5. Will refinancing lower my payments?

The objective of the Homeowner Affordability and Stability Plan is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, you will receive* a “Good Faith Estimate” that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

*Note: If you think you are a candidate for this part of the plan and would like a Good Faith Estimate contact us in the sidebar today.

For those of you who are in deeper trouble and are significantly upside down on your home value the loan modification programs with current lenders look like they will be beefed up a lot as well. See our post on part 2 of the plan for that scenario.