The details for the Homeowner Affordability and Stability Plan were released yesterday. The new title of the program is “Making Home Affordable.”
There are two components for home owners, refinancing and loan modifications. Participation is voluntary and the lender has to choose to participate. Details of both plans are below.
Home Affordable Refinance
Borrowers who haven’t been able to refinance because their home value decreased now have an option to refinance into a 30 or 15 year, fixed rate loan.
Eligibility is as follows:
- Your loan is is owned or controlled by Fannie Mae or Freddie Mac.
- You are current on your mortgage payments.
- You have stable income to support the new mortgage payments.
- Your first mortgage will not exceed 105% of the current market value of the property.
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Home Affordable Modifications
Requirements for the loan modification program are:
- Your loan must have been obtained on or before January 1, 2009.
- Have a first mortgage with a balance less than $729,750.
- Be owner occupied in a one to four unit property.
- Document income with signed IRS 4506-T, two most recent pay stubs, and most recent tax return.
- Sign an affidavit of financial hardship.
- Modify by December 31, 2012. Updated: Extended until December 31, 2013.
- Have a mortgage payment that is no longer affordable, examples include significant change in income or expenses.
- Go to counseling if household debt is more than 55% of income.
The loan modification will lower the interest rate to make the payment (principal, interest, taxes, insurance, and home owners association dues) 31% of income. After five years, the rate will adjust 1% each year until it reaches the prevailing market interest rate on the date the modification.
In addition, there may be an incentive payment for borrowers for on time payments. Over five years the total principal reduction is up to $5,000.