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.