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White House Answers Questions on Mortgage Plan

The White House this morning posted this list of questions and answers that homeowners might have about Pesident Obama's new mortgage plan:


Borrowers Who Are Current on Their Mortgage Are Asking:

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

I owe more than my property is worth, do I still qualify to refinance under the Homeowner Affordability and Stability Plan?
Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.

How do I know if I am eligible?
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.

I have both a first and a second mortgage. Do I still qualify to refinance under the Homeowner Affordability and Stability Plan?
As long as the amount due on the first mortgage is less than 105 percent of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.

Will refinancing lower my payments?
The objective of the Homeowner Affordability and Stability Plan is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a "Good Faith Estimate" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

What are the interest rate and other terms of this refinance offer?
The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.

Will refinancing reduce the amount that I owe on my loan?
No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

How do I know if my loan is owned or has been securitized by Fannie Mae or Freddie Mac?
To determine if your loan is owned or has been securitized by Fannie Mae or Freddie Mac and is eligible to be refinanced, you should contact your mortgage lender after March 4, 2009.

When can I apply?
Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009.

What should I do in the meantime?
You should gather the information that you will need to provide to your lender after March 4, when the refinance program becomes available. This includes:

  • information about the gross monthly income of all borrowers, including your most recent pay stubs if you receive them or documentation of income you receive from other sources
  • your most recent income tax return
  • information about any second mortgage on the house
  • 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.

Borrowers Who Are at Risk of Foreclosure Are Asking:

What help is available for borrowers who are at risk of foreclosure either because they are behind on their mortgage or are struggling to make the payments?
The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.

Do I need to be behind on my mortgage payments to be eligible for a modification?
No. 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.

How do I know if I qualify for a payment reduction under the Homeowner Affordability and Stability Plan?
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 that will be available on March 4, 2009.

I do not live in the house that secures the mortgage I’d like to modify. Is this mortgage eligible for the Homeowner Affordability and Stability Plan?
No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.

I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?
Yes. Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one unit as your primary residence.

I have two mortgages. Will the Homeowner Affordability and Stability Plan reduce the payments on both?
Only the first mortgage is eligible for a modification.

I owe more than my house is worth. Will the Homeowner Affordability and Stability Plan reduce what I owe?
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.

I heard the government was providing a financial incentive to borrowers. Is that true?
Yes. To encourage borrowers who work hard to retain homeownership, 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 can have up to $5,000 applied to reduce their debt by the end of that period.

How much will a modification cost me?
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. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.

Is my lender required to modify my loan?
No. Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering substantial incentives and it is expected that most major lenders will participate.

I'm already working with my lender / housing counselor on a loan workout. Can I still be considered for the Homeowner Affordability and Stability Plan?
Ask your lender or counselor to be considered under the Homeowner Affordability and Stability Plan.

How do I apply for a modification under the Homeowner Affordability and Stability Plan?
You may not need to do anything at this time. 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, contact your mortgage servicer or a HUD-approved housing counselor. Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.

What should I do in the meantime?
You should gather the information that you will need to provide to your lender on or after March 4, when the modification program becomes available. This includes


  • 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 most recent income tax return

  • information about any second mortgage on the house

  • 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.


My loan is scheduled for foreclosure soon. What should I do?
Contact your mortgage servicer or credit counselor. 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. We support this effort.

By Lexie Verdon  |  February 18, 2009; 10:37 AM ET
Categories:  The Ticker  
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Next: Obama: Housing Plan Will Not Aid the 'Unscrupulous and Irresponsible'

Comments

I appreciate the way the Obama administration is trying to be open and public, to give more information than was available before. It may not make everything completely transparent, but it is a step in the right direction.

Posted by: tinyjab40 | February 18, 2009 12:02 PM | Report abuse

People should demand that if a bank gets any money from the government under this stimulus package, there should be a stipulation that the bank should make at least 65% of it available for all consumer loans at interest rates no higher than 4.5% and putting those usury laws back into effect in all states. Banks would still make a profit and that would allow people to refinance at lower rates and to consolidate high interest rate credit cards to that 4.5% lower rate. Imagine how quickly people would rush to utilize this offer. This would have a positive and immediate effect on the economy because that would allow people to pay off debts faster and have more money to spend to stimulate the economy or save. This would cost the government nothing more that what they were already willing to spend and lending institutions would be pressured to operate more efficiently with less money for obscene salaries and bonuses. In addition, there should be a law forcing other lending institutions to cap their lending rate at 8% . For all of the lending institutions, late payment penalties (where predatory lenders really make their money) should not exceed more than 5% of the original loan amount.

Posted by: My2cents14 | February 18, 2009 12:56 PM | Report abuse

RE: My2cents comment on capping lending at 8%-- There are 5 main mortgage insurance companies that provide mortgage insurance to borrowers that put less than 20% down on a home. Mortgage insurance is requred for all home loans with less than 20% down except for FHA loans.

About 60% of the home loan business is originated by mortgage brokers. The brokers have been held out as the prime scape goat for bad loans and this continues as the main mortgage insurance providers will begin instituting a policy that they will not insure any loan coming from a broker, only loans from banks. This decision is based on the statistic that the majority of failing loans originated thru a broker and not a bank (makes sense if brokers originate the majority of home loans).

What is being missed here is that the broker brought the product (the loan) to the home buyer. The product was created by the bank and the loan was granted/approved by the bank. The broker brings the bank product and the consumer together. The bank still ulitimately created the product, hard selled it to brokers and then blithely approved all of those suspect loans for profit. The brokers can not be held responsible solely for this mess is the banks did not create the product and approve those products to be sold.

If mortgage insurers stop insuring loans that orignate with brokers, they will effectively eliminate the mortgage broker industry and when that goes, you can say good bye to competitive interest rates. An 8% cap? Be prepared to expect interest rates that never move below 9 or 10% despite what is happening in the bond markets as the banks as we well know will be more than happy to pocket the profits.

Posted by: drdziak | February 18, 2009 2:13 PM | Report abuse

It appears that in this program the mortgage can be worth no more than 105% of the home. That limits the usefulness of this program, but I guess that something is better than nothing. This doesn't help people whose current home value is say 10, 20 or 30% underwater. Some of those people may just decide to walk away from their home if it appears that their investment may never pay off. Also, if we are bailing out the banks by purchasing toxic assets, then why not allow homeowners to reduce the balance due on their mortgages to current fair market value? Why do we apply the concept of "moral hazard" to individual owners/investors, but not to the institutions that peddled these dangerous loans and then bundled them for sale to other investors?

Posted by: SWadvocate | February 18, 2009 4:08 PM | Report abuse

I'm releived that the limit for aid is that the principal can be no more than 105% of the loan. Most of the people I know who bought McMansions that are now worth far less than 105% of their loans knew at the time that A) they could not afford the house (we knew it too), B) they did not need the massive square footage, and C) they were gambling and expecting to sell the house in a couple years and pocket an easy $200,000 and laugh at those who played by the ruless. The limit keeps taxpayers like me from paying for their bet gone awry while I played it safe and bought a house I could afford. Yes it's small and I wish I could have more space and sell it for a profit some day, but not at my taxpaying neighbors' expense.

Posted by: VirginiaVoter2 | February 18, 2009 4:30 PM | Report abuse

Lets see..

Obama demands $75 Billion for foreclosure relief after flying across the country and his usual Messianic Signing ceremony. The Leader, alone with his burdens.Has anyone ever seen the solitary leader stage management before? Like before WWII?

Complacent,content, and comatose White House Press corp enjoying his new ride and free drinks on Air Force One.

While back at the ranch, Fannie Mae guarantees DOUBLE from $200 Billion to $400 Billion today.

So $75 Billion is the story of the day masking the DOUBLING of the Fannie Mae bailout by $200 Billion.

Nice.

I guess its all monopoly money now under Obama Socialism anyway.

Posted by: JaxMax | February 18, 2009 4:32 PM | Report abuse

ASK YOURSELF THESE QUESTIONS THE MEDIA IS TOO STUPID TO ASK

If this $75 Billion will really help those who committed fraud to get a mortgage and reduce foreclosures....

Why has the Federal Guarantee of Fannie Mae defaults been DOUBLED today to $400 Billion??

Why does Obama's 75Billion NOT include any investigation as to whether the mortgages were obtained by fraud??

What happens when Obama's drunken drooling deficit spending has to be paid?? Only 2 choices:raise taxes or monetize the debt which means just print worthless money.

What happens if the rest of the world shrewdly realizes the dolar is worthless since Obama is printing monopoly money? How will that effect YOU?

Posted by: JaxMax | February 18, 2009 4:35 PM | Report abuse

It is nice that the Wash Po now lets the Obama White House write the questions and answers.

Saves time.

Posted by: JaxMax | February 18, 2009 4:38 PM | Report abuse

TinyJab40

Banks aren't getting government money from "this stimilus plan", they are getting money from the bailout. Also, this mortgage assistance plan announced Wednesday that we are talking about here is not part of "this stimulus plan", as you state, either, but it is apparently another part of the bailout plan or a separate assistance plan for homeowners.

Posted by: antiquepaper1 | February 18, 2009 6:02 PM | Report abuse

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