Making Home Affordable Program
In March 2009, the federal government introduced the Making Home Affordable program. As the name implies, its purpose is to help struggling homeowners stay in their homes by giving them affordable, sustainable mortgages. There are two ways this can be accomplished – through loan modification or refinancing.
The loan modification program is for homeowners who are no longer able to make their monthly mortgage payments, whether they are current or have fallen behind. The refinance program is for homeowners that are current on their mortgage and want to reduce their interest rates, but have been unable to do so because their home’s value has dropped.
Under the Home Affordable Modification program, borrowers’ existing loans are modified so that the monthly mortgage payment does not exceed 31% of their gross income. Modification can include a reduction in the interest rate, extension of the repayment period, and deferred payment or even forgiveness of some the principal balance. The 31% guideline applies to the first mortgage. If a borrower has both a first and second mortgage and receives a modification on the first mortgage, he or she will automatically receive a modification on the second mortgage if the lender is participating in the program.
In order for you to be eligible for the program:
Unlike the refinance program described below, your loan does not need to be owned or securitized by Fannie Mae or Freddie Mac in order for you to participate. It’s up to individual lenders to determine if they are participating in this program. If you are interested in the Home Affordable Modification program, you should contact your loan servicer to see if they are participating. If so, they will tell you what documentation you need to submit to start the application process. Generally, this will include pay stubs and tax returns to document your income, verification of your assets, and an accounting of all of your debt.
You and your servicer will complete the necessary steps to determine whether the modification program is appropriate for you. This will include assessing your financial situation, and you may be required to complete financial counseling. Once approved, they will put you on a trial modification for three months at the new interest rate and payment level. During this time period, the servicer must determine if you are eligible for a Hope for Homeowners refinance. (This is different from the refinance program discussed below). Under Hope for Homeowners, your mortgage is refinanced to a fixed-rate loan for no greater than 90% of your home’s current market value. If you are not eligible for Hope for Homeowners but successfully make the payments under the trial period, your servicer will execute a permanent modification agreement that will lower your interest rate to a fixed rate for five years and then is capped at a low rate for the remaining life of the loan.
The program expires on December 31, 2012.
The eligibility requirements for the program include:
To participate in the refinance program, contact your lender or servicer to begin the application process. You will need to provide information and documentation about your income and debts. If your mortgage is with Fannie Mae, you can apply for a Home Affordable Refinance loan with any Fannie Mae approved lender.
The program expires on December 31, 2013.
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For further information on the Making Home Affordable program, visit www.makinghomeaffordable.gov. For further information on this and other elements of the financial stability program, visit www.financialstability.gov.
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