In response to the unprecedented collapse of the residential real estate market and in response to current catastrophic unemployment, the Federal government has created several initiatives to help homeowners. Here is a summary of the various initiatives:
I. The Home Affordable Refinance Program
The Home Affordable Refinance Program offers homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac, the opportunity to refinance. Normally, these homeowners would be unable to refinance because their homes have lost value, pushing their loan-to-value ratios above 80%. Under this federal program, which has been recently expanded, homeowners are eligible to refinance even when their home value is less than their current mortgage debt. The Home Affordable Refinance Program allows borrowers to refinance into a 30- or 15-year fixed rate loan even if they owe more on their mortgages than their homes are worth. The Home Affordable Refinance Program ends June 10, 2010.
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Who Qualifies?
- The mortgage must have been originated on or before January 1, 2009.
- The home must be an owner-occupied primary residence.
- The borrower's first mortgage on the home cannot exceed 125 percent of the current market value of the property.
- The borrower must have a mortgage loan owned or securitized by Fannie Mae or Freddie Mac
- The borrower must be current on his/her mortgage payments.
- The borrower must have income sufficient to make payments under the new loan terms.
- To find out if your loan is owned or securitized by Fannie Mae, call (800) 7FANNIE
Who does NOT qualify for the Home Affordable Refinance program?
- Investors.
- Borrowers who are currently delinquent on their mortgage payments.
- Borrowers who have loans that are not owned by Fannie Mae or Freddie Mac.
- Borrowers whose first mortgage on the home exceeds 125 percent of the current market value of the property.
- Borrowers who do not have enough income to afford the new mortgage payments.
II. The Home Affordable Modification Program
Under this program, banks and credit unions can not work with the FHA, VA, the USDA and the Federal Housing Finance Agency in modifying eligible mortgages so that homeowners can avoid foreclosure. The objective is to modify the existing mortgage payment so that borrowers can better afford their monthly payments.
Who Qualifies?
- The mortgage must have been originated on or before January 1, 2009.
- The home must be an owner-occupied primary residence.
- Mortgage amount does not exceed $729,750, with higher limits allowed for owner-occupied properties with 2-4 units.
* Income can be fully documented and verified via pay stubs (two most recent pay stubs), most recent tax return and a signed affidavit of financial hardship.
* Homeowners who are at risk of imminent default or at least 60 days delinquent on their mortgages.
* Loan modifications are available now until December 31, 2012. Loans may be modified only once under their program. Monthly loan payment amounts are reduced to 31% or less of a homeowners gross monthly income. The modification steps first require the lender to reduce the mortgage interest rate down to no less than 2%. Then, if necessary, the lender can extend the term of the mortgage to a maximum of 40 years. Last course of action for a lender would be foregoing principal on the mortgage (principal forgiveness).
III. The American Recovery and Reinvestment Act of 2009
Under this act, those with large FHA mortgages now have the ability to refinance thanks to higher loan limits set by the Economic Stimulus Act of 2008. Effective through the end of 2009, these limits range from $271,050 to $729,750 and permit FHA to insure loans on amounts up to 125 percent of the 2007 area median house prices.
V. HOPE For Homeowners Program
Under this program, borrowers having difficulty paying their mortgages will be eligible to refinance their existing mortgage into FHA-insured mortgages that they can afford. Lenders are required to reduce the borrowers mortgage down to no more than 90 percent of the home's new appraised value. In effect, the lender forgives principal in order to avoid foreclosure and allow the homeowner to stay in their homes.
Who Qualifies?
- The mortgage must have been originated on or before January 1, 2008.
- Homeowner cannot afford their current loan.
- Homeowners who made a minimum of six full payments on their existing first mortgage
- Homeowners who do not own a second home.
- Homeowners who agree to share in the equity created at the beginning of their new HOPE for Homeowners mortgage and any future appreciation in the value of their home.
* The new mortgage payment must be at or below 31% of the borrowers gross monthly income, but may be as high as 38% under a trial modification period. The program's inception is October 1, 2008 and ends September 30, 2011.
For more information homeowners should call the FHA at 1-800-CALL-FHA.
V. Helping Families Save Their Homes Act
This bill amends the HOPE for Homeowners Program to permit a reduction of excessive origination fees, provide incentives to mortgage service providers to engage in loan modifications under this program and reduce administrative burdens to loan underwriters by making the requirements consistent with standard FHA loan practices.
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