Detail of Obama’s Mortgage Plan - Do You Qualify?
Monday, March 09, 2009
Last week, Obama officially released the final details of his $75 billion foreclosure relief plan. I have outlined a quick summary of the major points of the plan and how homeowners can find out if they are eligible to either modify or refinance their existing loan. There are two portions to the plan. One portion allows non-delinquent homeowners who have underwater mortgages to refinance at a lower rate and the second portion allows delinquent homeowners to get a loan modification. Here is a quick summary of the major points:
Part One: Refinance Guidelines:
Part Two: Modification Guidelines:
You must demonstrate significant hardship such a loss of an income. If you have enough liquid assets to pay your mortgage then you do not qualify.
The mortgage in question must be on your primary residence.
The mortgage to be modified must have been originated on or before January 1st, 2009.
The unpaid principal balance must be equal or less than $729,750 for one residence
Each mortgage can only be modified under the program once.
If you qualify for the program you can receive a Pay-for-Performance Success Payment that pays for the principal balance on the loan as long as you are current on the payments. You can receive $1,000 per year for up to five years.
Foreclosures will be suspended while borrowers are being considered for a modification.
The program targets a front end debt to income ratio of 31%. This means that the loan should be modified so that the borrower’s principal,interest,taxes,insurance, and HOA is 31% or less of his or her gross income. The government will allow services to reduce the ratio to 38% and then kick in a cash subsidy to reduce the amount to 31%.
The modification will last 5 years. The floor for interest rates is 2% and the cap is the market rate on the day of the modification. If the loan is modified through temporarily lowering interest rates then it would go back up to the market rate after five years.
No modification fees will be paid by the borrower.
Current late fees on the delinquent balances will be waived.
Servicers will be compensated $1,000 for each eligible modification.
Servicers will also receive a $1,000 per year Pay for Success fee for up to three years. This is payable 12 months from the time the borrower starts the program and makes timely payments.
Lenders or investors will be paid a $1,500 one time incentive for each successful modification.
The details seem to indicate that the focus is really to help those who cannot currently afford their homes stay in their homes. One thing that I find a bit ironic in these details is that the delinquent borrowers who qualify for the modifications will be able to get $1,000 per year for paying on time while those responsible borrowers who have always paid ontime do not even get a break on the refinancing fees. Anyway, it is estimated that about 9 million homeowners can enroll in this program. If you do qualify for either program you can contact your loan servicer starting today. Please see the official page for this program is at http://www.financialstability.gov/makinghomeaffordable/.
This really seems like a good program. It really seems that he is trying to help those who can not afford a home straight out. Hopefully those out there can take advantage of this program and benefit.
http://www.streamlinerefinance.net
Posted by Dave on 05/11 at 12:07 PM