Homeowner Affordability and Stability Plan – Making homes affordable

By glblguy

Foreclosure Protection Program

Yesterday, President Obama rolled out another portion of his economic recovery plan, the eagarly anticipated:  Homeowner Affordability and Stability Plan (also called the Making homes affordable program).

The $75 billion dollar program which runs through June 2012 does two things: 1) Helps more home owners refinance  at new low interest rates 2) Provides incentives to lenders and mortgage servicers to restructure mortgages to more affordable levels. Details of the program include:

  • Mortgages for single-family properties worth more than $729,750 are excluded.
  • Homeowners whose mortgage values exceed home value by more than 5% are not eligible.
  • Interest rates can be lowered to as low as 2 percent and then if necessary, the term of the loan can be extended to a maximum of 40 years.
  • The home must be a primary residence and the home may not be investor-owned.
  • The home may not be vacant or condemned.
  • Borrowers must provide their most recent tax return and two pay stubs, as well as an “affidavit of financial hardship” to qualify.
  • Borrowers in bankruptcy are not automatically eliminated from consideration for a modification.
  • Borrowers in active litigation regarding the mortgage loan can qualify for a modification without waiving their legal rights.
  • Borrowers are only allowed to have their loans modified once, and the program only applies for loans made on Jan. 1, 2009 or earlier.
  • Eligibility is restricted to loans originated on or before Jan. 1, 2009.
  • Incentives are provided to extinguish second liens on loans modified under the program.
  • Homeowners are eligible for up to $1,000 of principal reduction payments each year for up to five years.
  • Separately, up to 5 million borrowers who have mortgages held by government controlled mortgage finance giants Fannie Mae and Freddie Mac should be eligible to refinance through June 2010.

Refinance at lower rates

The program targets homebuyers who have kept current on their mortgages, but have been unable to refinance due to severely falling home prices nationwide. But here’s the catch, your loan must be owned by Fannie Mae or Freddie Mac currently. The government is working with other loan providers to get them to participate, but it’s unclear on how long this will take. The administration is encouraging borrowers who think they qualify to call their lending institutions for more information.

Administration officials expect this program to help more than 5 million homeowners.

Incentives to Lenders and Servicers

The government is also providing incentives to lenders, servicers and borrowers to enter into “short sales” or “deed-in-lieu of foreclosure” agreements for those who can’t afford to stay in their homes. For these types of situations, the bank will agree to take back the home for less than what’s owed without filing for foreclosure.

The new program also includes a new provision to eliminate borrowers’ second mortgages, which will reduce their overall debt levels. Investors in those mortgages, who at times have blocked modifications because they don’t benefit from the adjustments, will be paid to eliminate those concerns about benefiting. Details on how much they’ll receive are yet to be announced, but are expected in the next few weeks. Lenders and servicers that get second-mortgage holders to participate will receive an additional $250.

You can contact your lender starting yesterday (March 4th) to see if they are participating in the program. Federal officials have also posted additional information for at www.hud.gov. The site includes a self-assessment tools to see if you qualify.

What are your thoughts on the program? Will it help? Are you concerned that people will take advantage of this program? Should the government even be interviening? Add a comment and share your perspective.

6 Responses (including trackbacks) to “Homeowner Affordability and Stability Plan – Making homes affordable”

  1. Monroe on a Budget Says:

    I really wonder how many homeowners that will help in my region. Home values have fallen so much in southeast Michigan that there will be people that even that 105% refinance ratio won’t help.

  2. Neal Frankle Says:

    I’ve got an idea for a “Homeowner and Stability Plan”

    Only be a homeowner is you can afford it.

    Much lower cost alternative. Why should the government be involved in this?

  3. Dan Says:

    Anyone else concerned about the whole stimulous recovery seems to be geared to making lenders lend and consumers borrow more and more? Isn’t part of the whole problem that we as a nation of consumers, just became so overlevereged that we couldn’t affort it any more? How will this be anything but a short term jolt which will leave us all worse off after all is said and done?

  4. Gillian G. Says:

    Thanks GLBL for your info on the Stability Plan. Information online (in many cases direct from the U.S. Treasury and related consumer websites) is just the starting point. Bridging the information gap, I found the best affordability calculator @ HomeAffordPlan.com. This web service seems like a dramatically surer way to a reliable eligibility determination than the toll free number found on the typical mortgage statement. Key differences b/w the calculators that I noted were:

    1) The Treasury’s calculator does not give an analysis based on the persons specific financial situation. The calculator at homeaffordplan does, and does so for free without asking for identifying information.

    2) The government calculator does not mention the incentives available to the borrower of the $1500 payment and a $5000 reduction in principal.

    3) Homeaffordplan’s calculator results alert users if they will be required to undergo credit counseling in order to participate in the program.

    Hope the above helps anyone who properly benefit under the Plan!