Deal? No Deal? or Really Big Deal?
On February 18, 2009, President Obama announced a $75 billion plan that would allow many homeowners to refinance their mortgages and allow others to save their home from foreclosure using a special Loan Modification program. It’s part of a massive plan to get the housing market back on track.
Today, I’m going to focus on the refinance provisions of the plan. There has been a lot of systems work required to get both Fannie Mae and Freddie Mac set up to process these loans through the approval software. Sometime in early April, systems should be functioning properly and it will be smooth sailing.
Here is an overview of the program:
Borrowers who have less than 20% equity in their properties or those owing close to what the property is worth have had a very difficult time refinancing to a lower rate. “Making Home Affordable” will permit many of these people to refinance and take advantage of today’s lower rates.
Who are good candidates for the program?:
- Those with a Fannie Mae or Freddie Mac mortgage loan
- Mortgage payments are current – (haven’t been more than 30 days late in the past 12 months)
- You own or occupy a home with 1 to 4 units
- Income is sufficient to make mortgage payments
- The amount owed on the mortgage is about the same or slightly less than the property value
- You have an adjustable rate or interest-only mortgage and want a regular fixed rate
Notice from the above that rental properties are eligible – 4 units max. Still must be a Fannie Mae or Freddie Mac loan. Can’t get away from this requirement.
Let’s say you have a 1st and a 2nd mortgage loan on the property. What happens? Making Home Affordable will only refinance the 1st mortgage. If there is a home equity loan or home equity line of credit in addition to the primary mortgage, the equity lender will have to agree to subordinate their equity loan. It cannot be paid off with the refinance. This program is designed to get borrowers out of higher rate mortgages. It is not for cashout or debt consolidation.
Homeowners who want cash or debt consolidation must refinance under the normal guidelines and that means there must be equity in the property.
And what are the interest rates for the program?
Interest rates will be based on whatever current rates are at the time you apply. The program does not have “special rates.”
How do you apply? You have 2 choices. (1) Contact your current lender to see if you are eligible, or (2) You may call me at (908) 203-8680, ext 204.
Whatever you decide, inquire soon. This is a temporary program. And if your home is losing value, once you owe more than 5% over the value of your property, you no longer fit the program guidelines. In many areas, values are still dropping.
Many programs have been announced since the housing crisis hit. This is one of the best. Hitch a ride if you can.
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{ 2 comments… read them below or add one }
i live in ohio. did this kind of refinance. my loan was closed last week. i only had 6% equity. it was the only option i had to refinance. worked great for us. funny thing is countrywide didn’t mention it to us at all. we found out online.
Thumbs up to you Kate. I just had a client with a Wells loan tell me he phoned Wells and they didn’t mention the program. Part of this might be oversight by some lenders, high loan volume, and a lack of training. I would like to believe it is not intentional.