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 If you're confused by the new $75 billion mortgage loan modification program Congress just passed and that was signed by President Obama, you're not alone.
Do you qualify? What do you need to do to find out? The new initiative is called Making Home Affordable. There are two separate programs within it, the Home Affordable Refinance and the Home Affordable Modification. According to the official government Web site for Making Home Affordable, these are the facts: The Home Affordable Refinance program will be available to 4 million to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80 percent. Under the Home Affordable Refinance program, many of them will now be able to refinance their loan to take advantage of today's lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage such as a 30-year fixed rate loan. Owners can refinance up to 105 percent of the new value of the home. This program will end in June 2010. Eligibility requirements are as follows: • You are the owner and occupant of a one- to four-unit home. • The loan on your property is owned or secured by Fannie Mae or Freddie Mac. • At the time you apply, you are current on your mortgage payments (meaning you haven't been more than 30 days late in the last 12 months). • You believe that the amount you owe on your first mortgage is about the same or slightly less than the current value of your house. • You have sufficient income to support the new mortgage payments. The refinance improves the long-term affordability or stability of your loan. The objective of the Home Affordable Refinance is to provide creditworthy borrowers who have shown a commitment to paying their mortgage the opportunity to get into a mortgage with payments that are affordable today and sustainable for the life of the loan. Western Reserve Bank Assistant Vice President and Consumer Lending Specialist Marie Gerace points out that any lender you consult should explore what's right for you and your situation. "The lenders should realize that they have an obligation to the customer," said Gerace. "Borrowers should call their mortgage servicer or lender and ask about the Home Affordable Refinance or Home Affordable Modification program application process. Gather your information and documents before you call to speed up the application process." Be aware that there are questions you should ask your lender: What are the interest rates; what are the closing costs; what type of product are you buying. Call several lenders and compare their offers. And be aware that foreclosure scams abound. Medina County Auditor Michael Kovack offers common-sense advice: If it looks too good to be true, it probably is. Know what the product is and what you are signing. Beware of agents who say they will sell your home quickly. And avoid low-interest mortgage loans solicited over the telephone or Internet. Rob Hixenbaugh, a home loan specialist with Preferred Mortgage Consultants, points out that while many people would see a reduction in their mortgage payments, borrowers who are paying interest-only payments or those who have a low introductory rate that will increase in the future may not see their current payment go down. However, they could save a great deal over the life of the loan by avoiding future mortgage payment increases. Hixenbaugh points out that refinancing will not reduce the amount that borrowers will owe on the loan. The objective of the Home Affordable Refinance is to help borrowers get into more affordable loans. Refinancing will not reduce the principal amount you owe to the first mortgage holder or any other debt you owe. However, refinancing should save you money by reducing the amount of interest that you pay over the life of the loan. The Home Affordable Modification program will help up to 3 million to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments to no more than 31 percent of the borrower's gross monthly income. Working with the banking and credit union regulators, the FHA, the VA, the USDA and the Federal Housing Finance Agency, these program guidelines are expected to become standard industry practice in pursuing affordable and sustainable mortgage modifications. Banks and other mortgage providers can begin immediately to modify eligible mortgages under the modification program so that at-risk borrowers can better afford their payments. Eligibility requirements are as follows: • The mortgage loans must have originated on or before Jan. 1, 2009. • They must be first-lien loans on owner-occupied properties with unpaid principal balance up to $729,750. Higher limits are allowed for owner-occupied properties with two to four units. • The mortgage payment (including taxes, insurance, and homeowners association dues) must be more than 31 percent of your gross monthly income. • All borrowers must fully document income, including a signed IRS 4506-T, two most-
recent pay stubs, most recent tax return, and must sign an affidavit of financial hardship. • Property owner occupancy status will be verified through borrower credit report and other documentation. • Modifications can start from now until Dec, 21, 2012. Loans can be modified only once under the program. What documentation should you have? You will need information about the monthly gross income of all the borrowers on your loan, including recent pay stubs; your most recent income tax return; information about any second mortgage on the home; account balances and minimum monthly payments due on all of your credit cards; and account balances and monthly payments on all your other debts such as student loans and car loans. Hixenbaugh points out that is also a new FHA Streamline Refinance Program that he's receiving a lot of inquiries about. Borrowers with an FHA loan are now eligible to simply modify their interest rate and monthly payment with no credit check and no income verification. Homeowners who have been on time since they took out their FHA mortgage qualify. The simple process takes about a week. It can allow people to skip up to two months of mortgage payments, and can drastically reduce their monthly payment. "I just did an FHA Streamline Refinance for a Medina resident, and she is now saving $153 each month. Those who currently do not have an FHA loan can still take advantage of the extremely low interest rates and convert their loan to an FHA loan," Hixenbaugh said. In addition, Congress has enacted legislation to provide a tax credit of up to $8,000 for first-time homebuyers. Only homes purchased on or after Jan. 1, 2009, and before Dec. 1, 2009, are eligible. The tax credit is equal to 10 percent of the home's purchase price up to a maximum of $8,000. Homeowners do not have to pay it back -- a new development. This tax credit is significantly different from the tax credit enacted in July 2008. The prior tax credit was essentially an "interest-free loan" that had to be repaid over 15 years.
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