Requirements of Home Affordable Modification program:

Details on Homeowner Affordability Plan, and more
President Obama Outlined there would be opportunities to refinance homes held by Fannie & Freddie as well as, encouraging lenders to modify terms of loans to bring the debt to income (DTI) ratio to 38% by lowering the interest rate and/or reducing the outstanding principle balance. If the they do, the government will participate with them to further reduce the payment to 31% DTI and a 50/50 cost share basis.

• To learn if you are eligible for refinancing look here.
• To learn if you are eligible for modifaction look here.

1. Requirements of Home Affordable Modification program:
2. Primary residence?
3. Is the amount you owe on your first mortgage equal to or less than $729,750?
4. Are you having trouble paying your mortgage? For example, have you had a significant increase in your mortgage payment OR reduction in your income since you got your current loan OR have you suffered a hardship that has increased your expenses (like medical bills)?
5. Did you get your current mortgage before January 1, 2009?
   

If you answered yes to the above than take a look at the detailed guidelines on how this will work. Page 6 details on the "Standard Waterfall Process", which gets into the actual calculation lenders are to use.

I don't like the why the guideline was written. I had a hard time staying awake reading it. There were no examples, no video explainations. Why, no have a professor use a blackboard and go through some exercises, so people can understand better if they qualify, thereby reducing calls to lenders by those who won't benefit, or won't like the benefit offered.

Anyway now that you understand how it will sort of work, contact your mortgage servicer and ask to be considered for a Home Affordable Modification. They'll want your financial documents (paystubs, W-2s, tax returns, other debt stmts, and bank stmts), so have them ready.

This plan is not designed to reduce mortgage balances for borrowers who have sufficient income to make their mortgage payments but owe more than their homes are worth. It also will not help investor borrowers or borrowers who have no income and cannot make any mortgage payment.If you come across any good examples please let me know.

details on President Obama's Loan Modifcation Plan

The White House Blog does a great job going over the basics of the plan.
http://www.whitehouse.gov/blog/09/02/18/Help-for-homeowners/

Key take aways
March 4 – further details will be provided
Lenders will be self evaluating their portfolios to see who’s eligible, if you don’t hear from them, than contact them.
The program is focused on lowering the interest rates, not writing off loans
The loans need to be owned by Freddie or Fannie (you can find out by contacting your lender after March 4) (max loan would be $729,750 than??)
Even if your loans exceeds 80% of the value, Fannie and Freddie will refinance (I assume what they mean is that there won’t be an MI fee, or other risk based fee for going beyond 80% in LTV)
Maximum Loan-To-Value (LTV) is 105%
2nd mortgagee lenders have to agree to subordinate (i.e. no consolidation, terms of 2nd don’t change unless they you negotiate separately with them)
Primary residences only (1-4 units okay)
Interest rate you get is a 30 yr fixed at today’s market rate (this is not guaranteed to be better than what you have)
BIG Difference – you don’t have to be delinquent to qualify.
Current Debt to Income Ratio must exceed 31% (that is you must have a need!)
If your loan balance is greater than 105% there are incentives for the lender to reduce principal (let’s see how that plays out)
Fees for modification are typical refinance fees (escrow, title, appraisal, points, lender fees,…). Review the Good Faith Estimate, determine time to payback to determine if it makes sense to proceed.
Graph of who it'll help
I hope this program works, I like that fact it’s far more detailed than anything that’s come before it.

Sunil Sethi
www.sunilsethi.com

Jumbo conforming rolling back to $729,750 for rest of 2009.

However, as you should know by now, just because it was signed doesn’t make it effective immediately.

Here’s what needs to happen before you can get a $729,750 loan (sent by one of my wholesale lenders)

IMMEDIATE ATTENTION REQUIRED…

Recently, the President signed into law the new stimulus bill – called the American Recovery and

Reinvestment Act of 2009.

For conventional and FHA loans, the Act temporarily reverts the current loan limits back to the loan

amounts/levels allowed in 2008 with the Economic Stimulus Act. Three things must happen before

LENDER can accept loans with higher loan amounts:

1. The Agencies (Fannie Mae and Freddie Mac) and FHA must determine whether pricing, policy and/or

delivery requirements will be changed.

2. The Agencies and FHA must communicate their requirements to mortgage lenders.

3. LENDER must identify impacts caused by the Agencies’ and FHA’s requirements and implement the

changes.

Watch for additional information in the future about dates and specific changes. Until official notice of

the effective date for the American Recovery and Reinvestment Act of 2009 loan limits, Brokers should

continue to follow existing polices and processes regarding loan limits.

Sunil Sethi

www.sunilsethi.com