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President Obama’s
Homeowner Affordability and Stability Plan
Questions and Answers
Borrowers Who Are Current
on Their Mortgage Are
Asking:
1. 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.
2. 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.
3. 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.
4. 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% 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.
5. 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.
6. 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.
7.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.
8. 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.
9. When can I apply?
Mortgage lenders will begin
accepting applications after the details of the program are announced on March
4, 2009.
10. 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:
1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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.
12. 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.
13. 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.
14. 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.
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