Homeowner Affordability and Stability Plan – Making homes affordable
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.