Government Programs

Will the President's Plan Help You Avoid Foreclosure or Afford a Home?

The Homeowner Affordability and Stability Plan encourages lenders who received bailout money to help homeowners stay in their homes by getting their monthly mortgage payments lowered through refinancing or loan modification.

If that's not possible or affordable, homeowners may also get assistance and even cash for relocation when they complete a Home Affordable Foreclosure Alternative (HAFA) short sale. Find out if your property qualifies for HAFA.

Any lender that takes new taxpayer bailout money (Stimulus Funds) under the administration’s Financial Stability Plan will be required to participate. But other mortgage lenders may participate in the program on a voluntary basis, and loans are evaluated for modification on a case-by-case basis. The government is offering substantial incentives and it is expected that most major lenders will participate.

But not everyone who needs help will get it. If you are not sure what your next move should be, call me, Elva Branson-Lee at 678-855-5235 for a FREE consultation.

While some who owe more than their house is worth will get help, many of those who are most severely “under water” in their mortgages won’t get bailed out. Neither will real estate speculators, as this help is reserved for owner-occupants. And mortgage servicers won’t be able to modify mortgages if the terms of their contracts with the investors who own the pools of mortgages don’t allow it.

So who does qualify for the assistance?

To answer your questions, we went to the White House blog. Here is an overview of what we found:

Q: What if I owe more than my house is worth?  Will the Homeowner Affordability and Stability Plan reduce what I owe?

A: 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.

Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 125% of the current market value of the property (recently raised from the previous benchmark of 105%). For example, if your property is worth $200,000 but you owe $250,000 or less, you may qualify.  The current value of your property will be determined after you apply to refinance.

Q: How do I know if I qualify for a payment reduction or a HAFA short sale under the Homeowner Affordability and Stability Plan?

A: Mortgages of up to $729,750 will qualify for modifications or short sale under the program's guidelines, regardless of whether they are in high-cost areas.

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.

You do not even have to be behind in your mortgage payments. 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.

Only first mortgages are eligible for a modification.

Only loans originated on or before Jan. 1, 2009, are eligible, and modified payments will remain in place for five years

To find out if you qualify for a Making Home Affordable refinance, answer these questions:

  1. Is your home your primary residence?
  2. Do you have a Fannie Mae or Freddie Mac loan? If you don’t know contact:
  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. Is the amount you owe on your first mortgage equal to or less than $729,750?
  5. Are you having trouble paying your mortgage? For example, have you had a significant increase in your mortgage payment OR reduction in your income since you got your current loan OR have you suffered a hardship that has increased your expenses (like medical bills)?
  6. Did you get your current mortgage before January 1, 2009?

If you answered "yes" to all of the above, you may qualify for a refinance or loan modification. If you are not sure what your next move should be, call me, Elva Branson-Lee at 678-855-5235 for a FREE consultation.

Q: What if I’m a homeowner on the brink of foreclosure?

A: Homeowners who are behind on their mortgage payments or who are struggling to keep current may qualify for a mortgage modification that reduces their monthly payment by reducing the interest rate and extending the term of the loan.

Contact your mortgage servicer or mortgage lender. Many lenders will postpone foreclosure sales on home loans that could qualify for the modification.

(Editor's note: I recently had a client who was scheduled for foreclosure sale in 3 weeks. Three months later, she got her modification approved, including a lowered monthly payment that will allow her to stay in her home.)

To qualify, the house must be your primary residence, your mortgage payment must be greater than 31 percent of your monthly gross income and your loan must not exceed current Fannie Mae and Freddie Mac loan limits, which vary by region and max out at nearly $729,750.

Owners of two-, three- and four-unit properties are eligible as long as they live in one unit as a primary residence.

Q: How do I apply for a modification under the Homeowner Affordability and Stability Plan?

A: 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, you may want to get professional Help. Contact your mortgage servicer, a HUD-approved housing counselor or a Certified Distressed Property Expert (CDPE).  Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.

To participate, borrowers will have to sign an affidavit of financial hardship and verify their income with documents. “If we would have had such stringent verification over the last four or five years, we probably wouldn’t be in as bad a position as we are in,” says Richard Moody, the chief economist at Mission Residential. But while Moody has no objection to such verification, obtaining documents from so many homeowners could be an onerous effort. “It’s going to be a very time-consuming process,” he says.

Q: What should I do in the meantime?

A: Get help if you think you might need it. Contact your lender to get their refinance or modification guidelines. Contact a real estate professional for information on your local market. Get a large manilla envelope and begin to fill it with the information that you will need to provide to your lender.  This includes but is not llimited to

    • your financial worksheet - 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 2 most recent income tax returns
    • your 2 most recent pay stubs or proofs of income 
    • information about any second mortgage on the house
    • information about your assets
    • 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
    • a detailed account of your total monthly pre-tax income and expenses
    • etc. as requested by your particular lender.

Q: But my loan is already scheduled for foreclosure.  What should I do?

A: Contact your mortgage servicer, credit counselor or Certified Distressed Property Expert (CDPE). Don't delay. Time is not your friend in this situation. 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. Yet, if your home is already scheduled for foreclosure, you've no time to lose.

Q:What if I’m not near foreclosure? Do I get any assistance?

A: Borrowers who are current on their mortgages but can’t refinance into lower interest-rate loans because their homes have fallen in value are eligible to refinance into a 30- or 15-year, fixed-rate loan under the plan, but only if their loan is held by mortgage finance companies Fannie Mae or Freddie Mac.

To qualify, homeowners can’t owe more than 125% of their home’s current value on their first mortgage (up from the previous limit of 105%). For example, if your home is worth $100,000, your first mortgage can’t exceed $125,000.   Borrowers with a second mortgage are eligible as long as their first mortgage isn’t more than 125% of their home’s value. The value of your property will be determined after you apply to refinance.

Q: What help is available for borrowers who stay current on their mortgage payments but have seen their homes decrease in value?

A: Under the Homeowner Affordability and Stability Plan, eligible borrowers who stay current on their mortgages but have been unable to refinance to lower their interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30- or 15-year, fixed rate loan. Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they hold in their portfolios or that they placed in mortgage backed securities.

Q: How do I know if I am eligible?

A: 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.

Q: Any breaks for first-time home buyers?

A: First-time buyers who purchase a home between Jan. 1 and Dec. 1 will be eligible for a tax credit of 10 percent of the value of the home, up to $8,000.  Homeowners don’t have to pay back this credit over the next 15 years, the way they had to with the $7,500 tax credit enacted last summer. However, buyers would have to repay the credit if they sold their homes within three years.

First-time buyers are defined as those who haven’t owned a house for at least three years.

Q: Any other breaks for current homeowners?

A: Homeowners may get a tax credit of up to $1,500 by making their homes more energy-efficient this year or next.

Many projects qualify, such as installing energy-efficient windows, doors, furnaces or air conditioners, or adding insulation. Homeowners can get back 30 percent of their expenses, up to $1,500.

Q: How soon can I expect to take advantage of these benefits or aid?

A: Right now. The refinancing and loan modification programs started March 4, 2009.

The first-time home-buyer tax credit is in effect from the first of the year through the end of November.

The “green” home tax credit applies to energy-efficient improvements made through 2010.

Q: What should I do to get started?

A: If you’re interested in refinancing or applying for a loan modification, collect all necessary documents to give to your lender. These include your most recent pay stubs and/or other documents detailing the income you receive, your most recent tax return, information about your second mortgage if you have one, payment information on your credit cards if you carry a monthly balance and payment information on all other loans, like student loans and car loans.

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

A: Yes. To encourage borrowers who work hard to retain home ownership, 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 may have up to $5,000 applied to reduce their debt by the end of that period.

Q:How much will a modification cost me?

A: 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. 

However, you may benefit from the expertise of a real estate professional. The process --- collecting and submitting the necessary documentation, seemingly endless phone calls, and negotiating a fair refinance or modification based upon the trends and data of your local market --- may be time-and-energy consuming. A Certified Distressed Property Expert (CDPE) is experienced in negotiating with lenders on behalf of financially strapped homeowners, and may greatly assist you through the process to a successful end result.

Borrowers should beware --- when you need assistance with a loan modification, do your due diligence to be sure your are hiring a licensed and certified results-based real estate professional. And be sure to get a written 100% money back guarantee in the event you do not qualify for and complete a mortgage refinance or loan modification.

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Get Help Now!
Get all your questions answered by a Certified Distressed Property Expert. Avoid Georgia Foreclosure offers professional Loan Modification Assistance. Contact me at 678-855-5238 for a complimentary personal pre-modification consultation.
 
For more information, visit http://www.financialstability.gov.
 
 
 
 
 
 The federal government's new site, MakingHomeAffordable.gov, is intended to help communicate how the program works and who is eligible .