Understanding Obama’s Making Home Affordable REFINANCE plan

Much of the confusion came from the belief that the refinance and modifications under “Making Home Affordable” (MHA) program were one of the same.

To make matter worse, loan modification “so called experts” are yapping on the radio and TV spots telling everyone that this plan won’t work or that they can qualify clients directly with their lenders for a fast approval.

Well, of course they are going to say that!

It is in their best interest to keep homeowners ignorant about the “Making Home Affordable” programs and keep charging them illegal upfront fees for modifications.

MAKING HOME AFFORDABLE REFINANCE

Looking at the “Making Home Affordable Refinance,” it will provide refinancing options through June 2010 for homeowners who are “underwater.” However, they must have mortgages held by Fannie Mae and Freddie Mac which consequently should be under the Federal Housing Finance Agency’s (FHFA) conforming loan limits of $729,750.

Moreover, homeowners should understand that if they could not qualify under the MHA Refinance program, they could still qualify under the MHA Modification program.

ELIGIBILITY

To determine if your loan is owned or securitized by Fannie or Freddie, call the following numbers or go to their corresponding websites:

• Fannie Mae
• 800-7FANNIE (800-732-6643 / 8am to 8pm EST)
• FannieMae.com/homeaffordable
• Freddie Mac
• 800-FREDDIE (800-373-3343 / 8am to 8pm EST)
• FreddieMac.com/avoidforeclosure

The minimum eligibility criteria for this plan are:

• Borrowers will need to be current with their mortgage payments and have sufficient income to support the new payment.
• The property must be owner occupied. This program will not aid speculators or house flippers.
• The property must have less than 20 percent equity to qualify.
• The first mortgage may not exceed 105 percent of the current market value of the property. So for example if a property is worth $500,000, the borrower must owe no more than $525,000.
  • You can use the following calculation: {Property’s current value x 1.05 = MHA refinance eligible limit}

  [Update July 1st, 2009: FHFA authorized Fannie and Freddie to expand the MHA Refinance program loant-to-value ratio ceiling from 105 to 125 percent]

If the borrower, however, has a second lien and the combined debt of the first and the second exceed 105 percent, the borrower may still be eligible as long as all junior lien holders (i.e.: 2nd mortgage lien, 3rd mortgage lien) agree to stay on a subordinating position. In other words, the new refinanced mortgage under the MHA program must be placed as the borrower’s first mortgage.

REQUIREMENTS

Borrowers will be required to provide documentation in order to qualify for the MHA Refinance program. Some of the required documents are:

• Monthly gross income (before tax) documentation from the wage earners on the note. This includes most recent pay-stubs covering at least one-month and/or documentation of income received from other sources.
• Most recent income tax returns.
• Second mortgage information (e.g.: most recent mortgage statement information) on the property.
• Account balances due on all credit cards and the minimum payments due (i.e.: most recent credit card statement information).
• Account balances due on all other debts (e.g.: student loans, car loans, etc).

After gathering all this information, borrowers should call their own mortgage servicer/lender and ask about the “Home Affordable Refinance” application process.

However, understand that it may take a little bit of time before mortgage servicers/lenders are ready to accept applications.

The government has a “self-assessment tool” provided on the MakingHomeAffordable.gov website where homeowners can see if they can first benefit from the refinance program or consequently from the loan modification program. It will also provide suggestions about what can be done next based on the results of the self-assessment tool. Additionally, the site has a “Q &A section for homeowners” detailing the MHA Modification program as well as the MHA Refinance program.

As always, contact a HUD-approved housing counselor and your lender if you have fallen or will fall behind with your mortgage payments.

WARNINGS

Finally, some of the warnings made by the Government to homeowners are:

• There is never a fee to get assistance or information about the “Making Home Affordable Refinance and Modification” programs from their lender.
• Never pay a person or organization that asks for a fee in exchange for housing counseling services or modification of a delinquent loan.
• Do not sign over the deed to your property to any individual or organization who promises to “save” your home.
• Never make your mortgage payments to anyone other than to your mortgage company.
• If you decide to use a modification company or agency other than a HUD-approved agency, verify they are approved and qualified to do modifications.

Comments