Friday, April 10, 2009

Details About the Making Home Affordable Refinance Program

This has been a much hyped program believed to be one of many steps that will help people who are upside down on their mortgages and want to refinance and take advantage of the low interest rates.  However, it may not be all that helpful to those who purchased a home in S.W Riverside county over the last six years.  Residents of Riverside and San Bernardino counties, which is considered ground zero for the housing mess, are typically more upside down on their mortgage than this program allows for.  But if you did make a considerable downpayment when you first purchased your home (and didn't use the equity as an ATM) there may still be hope. Originally expected to help 8 to 9 million homeowners, it has been downgraded to help maybe 5 million homeowners.  The Making Home Affordable program "looks the other way" with respect to falling home values, approving mortgage applications based on borrower payment history and benefit to the homeowner.

Not every homeowner is eligible for a Making Home Affordable refinance, however.  There are 3 basic criteria that must be met.

First, your existing home loan must be backed by either Fannie Mae or Freddie Mac.  Thankfully, both companies provide online lookup services.  Start with the Fannie Mae site because Fannie has a greater market share and because Freddie Mac's site requires your social security number.

Next, you must have a perfect mortgage payment history over the last 12 months.  Even one payment made 30 days late disqualifies you from participating in the Making Home Affordable program.  It is okay, however, if you were 20 days late on your payment and incurred late fees.

And lastly, the balance on your mortgage cannot exceed your home's value by more than 5%.  The math formula is (Mortgage Balance) / (Home Value).  If the quotient is greater than 1.05 then your loan-to-value exceeds 105% and you are not eligible for Making Home Affordable.

Now, assuming you meet the criteria, there are some noteworthy details of the Making Home Affordable program:

  1. If you didn't pay mortgage insurance prior to refinancing, you won't have to pay it after refinancing -- even if your loan-to-value exceeds 80%.

  2. All refinances require income verification -- even if the original mortgage was a stated income loan.

  3. Second mortgages cannot be paid off using loan proceeds -- they must be subordinated

There are other guidelines, too, and both Fannie Mae and Freddie Mac have dedicated portions of their website to the Making Home Affordable program. To the layperson, unfortunately, the information may be a bit technical.

Even the government's fact sheet can be a little dense at times.

Therefore, if you have specific questions about the Making Home Affordable program and your own eligibility, first check to see if Fannie or Freddie is backing your loan.  If they are, pick up the phone and call me to plan your next steps.

The program ends June 10, 2010.

1 comment:

  1. Many people have used and enjoyed the services of debt consolidation companies because of their amazing ability to manage bad credit or other debts. There are several people who can attest to the fact that debt consolidation is an excellent way to get ...