1. Homeowners who are behind on their mortgage payments or who are struggling to keep current may quality for a mortgage modification under the
Home Owner Affordability and Stability Plan. To qualify, the house must be your primary residence, your mortgage payments must be greater than 31 % of your monthly gross income and your loan mustn't
exceed current Fannie Mae and Freddie Mac loan limits, which vary by region and max out at nearly $729,750. Owners of two, three and four unit properties are eligible as long as they live in one unit
as a primary residence. Only first mortgages are eligible for a modification.
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| 2. Borrowers who are current on their mortgages but can't refinance into lower interest rate loans because their homes have fallen in value are eligible to refinance into a 30 or 15 year, fixed rate loan under the plan,
but only if their loan is held by mortgage finance companies Fannie Mae or Freddie Mac. To qualify, homeowners can't owe more than 105 % of their home's current value on their first mortgage. For example, if your home is worth $100,000, your first
mortgage can't exceed $105,000. Borrowers with a second mortgage are eligible as long as their first mortgage isn't more than 105 % of their home's value. The value of your property will be determined after you apply to refinance. |
| 3. Under the economic stimulus plan that President Obama signed, first time homebuyers who purchase a home between 1/1/09 and 12/1/09 will be eligible for a tax credit of 10 % of the value of the home, up to $8,000. Homeowners don't have to
pay back this credit over the next 15 years the way they had to with the $7,500 tax credit enacted last summer 2008. However, homeowners would have to repay the credit if they sold their homes within 3 years. First time buyers are defined as those who
haven't owned a house for at least 3 years. |
| 4. Homeowners also can get a tax credit of up to $1,500 by making their homes more energy efficient this year or next. Many projects qualify such as installing energy efficient windows, doors, furnaces or air conditioners,
or adding insulation. Homeowners can get back 30 % of their expenses up to $1,500. |
| 5. The refinancing and loan modification programs start 3/4/09. The first time home buyers tax credit is in effect from the first of the year 2009 through the end of Nov. 2009. The green home tax credit applies to energy efficient improvements made through 2010. |
| 6. If your are interested in refinancing or applying for a loan modification, collect all necessary documents to give to your lender. These include your most recent pay stubs and other documents detailing your income, your most recent tax return,
information about any second mortgages, payment information on your credit cards if you carry a monthly balance and payment information on all other loans, such as student loans and car loans. |
| 7. If your are facing foreclosure now and can't wait until 3/4/09, contact your mortgage servicer or mortgage lender and ask them to postpone foreclosure if you feel you qualify for the new Housing Plan.. |
| Eligibility and Verification : |
| A. Loans originated on or before 1/1/09. |
| B. First lien loans on owner occupied properties with unpaid principal balance up to $729,750. Higher limits allowed for owner occupied properties with 2-4 units. |
| C. All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardahip. |
| D. Property owner occupancy status will be verified through borrower credit report and other documentation; no investor owned, vacant, or condemned properties. |
| E. Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default. |
| F. Modifications can start from now until 12/31/12; loans can be modified only once under the program. |
| Loan Modification Terms and Procedures : |
| A. Participating servicers are required to service all eligible loans under the rules of the program unless explicitly prohibited by contract; servicers are required to use reasonable efforts
to obtain waivers of limits on participation. |
| B. Participating loan servicers will be required to use a net present value (NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the
net present value of cash flows with modification and without modification. If the test is positive, meaning that the nest present value of expected cash flow is greater in the modification scenario, the servicer must modify absent fraud or a contract prohibition. |
| C. Parameters of the NPV test are spelled out in the guidelines, including acceptable discount rates, property valuation methodologies, home price appreciation assumptions, foreclosure costs and timelines, and borrower cure and redefault rate assumptions. |
| D. Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31% of gross monthly income. |
| E. The modification sequence requires first reducing the interest rate (subject to a rate floor of 2%), then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness
or a Hope for Homeowners refinancing are acceptable alternatives. |
| F. The monthly payment icludes principal, interest, taxes, insurance, flood insurance, homeowner's association and/or condominium fees. Monthly income includes wages, salary, overtime, fees, commissions, tips, social security, pensions, and all other income. |
| G. Servicers must enter into the program agreements with Treasury's financial agent on or before 12/31/09. |
| Payments to Servicers, Lenders and Responsible Borrowers : |
| A. The program will share with the lender/investor the cost of reductions in monthly payments from 38% DTI to 31% DTI. |
| B. Servicers that modify loans according to the guidelines will receive an up front fee of $1,000 for each modification, plus pay for success fees on still performing loans of $1,000 per year. |
| C. Homeowners who make their payment on time are eligible for up to $1,000 of principal reduction payments each year for up to five years. |
| D. The program will provide one time bonus incentive payments of $1,500 to lender/investors and $500 to servicers for modifications made while a borrower is still current on mortgage payments. |
| E. The program will include incentives for extinguishing second liens on loans modified under this program. |
| F. No payments will be made under the program to the lender/investor, servicers, or borrower unless and until the servicer has first entered into the program agreements with Treasury's financial agent. |
| G. Similar incentives will be paid for Hope for Homeowner refinances. |
| Transparency and Accountability : |
| A. Measures to prevent and detect fraud, such as documentation and audit requirements, will be central to the program. |
| B. Servicers will be required to collect, maintain and transmit records for verification and compliance review, including borrower eligibility, underwriting, incentive payments, property verification, and other documentation. |
| C. Freddie Mac will audit compliance, GSE lenders and servicers already have much of the borrower's information on file, so documentation requirements are not likely to be burdensome. In addition, in some cases as appraisal
will not be necessary. This flexibility will make the refinance quicker and less costly for both borrowers and lenders. The Home Affordable Refinance program ends in June 2010. |
| D. To help borrowers determine if they are eligible, the government has put answers to common questions and assessment tools on the web site ... |
| www.FinancialStability.gov |
