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What the plan will help:

Refinancing Clients.

  • Conventional borrowers with less than $729,750 loan amount who never fallen seriously behind on the mortgage payments could refinance to a lower market rate.
  • If appraised value is less than 20% of amount owes (originally 5%).
  • Loans must be owned by Fannie and Freddie.
  • Ascertain lender's participation at http://makinghomeaffordable.gov/contact_servicer.html
  • Streamlined refinancing with no cash out.
  • Prove of sufficient income by pay stubs or Tax Returns.

Loan Modification plan until 2012 (Once only):

  • Apply to borrowers who have missed payments and/or close to foreclosure.
  • Borrowers with subprime mortgages such as Option ARM could modify their loans to lower payments.
  • Hardships letter due to income loss, increases in expenses, payment shock resulting in high DTI and property is underwater.
  • Origination must be before 1/1/09 with less than $729,750 for single family home.
  • If Debt-to-income ratio (DTI) is greater than 55% - borrower must attend HUD approved debt counseling.
  • House payment includes Principal, Interest, Property Insurance, Condo Fees. Mortgage insurance is excluded.
  • If qualify, servicer or lender will reduce mortgage payments to 31% of gross income.
  • The government will share the cost of bringing payments down from 39% to 31% of gross income.
  • Rates can be lowered by as low as 2% to reach the DTI of 31%. If that does not bring the DTI to 31%, then extending the term to 40 years. If that does not bring the DTI to 31%, then "Forbear Principal". It means that the borrower owes on the same amount as before but mortgage payment is calculated on part of the mortgage balance (that will bring his DTI to 31%). The full loan balance is due when the property is sold or refinance later.  
  • Term reverts to original term after 5 years by no more than 1%.
  • Servicers will get an upfront fee of $1000 for each modification plus "pay for success" fees of $1,000 per year on performing loans.
  • Homeowners who make their payments on time will get up to $1,000 in principal reduction payments a year for up to 5 years.
  • It's O.K. if foreclosure proceedings already have begun or if borrower is suing the lender.

What the plan will not help:

  • Borrowers with massive reverse equity areas such as in California, Las Vegas, South Florida and Phoenix.
  • Borrowers with loans NOT securitized by Fannie Mae or Freddie Mac.
  • Borrowers with loans greater than $726,750.
  • Borrowers who can't prove their income.

Details can be found at www.financialstability.gov

 

Posted by Sam Kader on March 4th, 2009 11:21 AM

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