The Housing Stimulus

By Jocelyn Porteria

On Feb 28 issue, I provided basic and important information on the Homeowner Affordability and Stability Plan which took effect March 4. As expected, homeowners are interested to lower down their monthly mortgage and the distressed ones see hopes of staying in their homes. I received phone calls inquiring about the program and these are the most common questions they have.
Borrowers who are struggling or missed payments and at risk of foreclosures.
Am I qualified for the payment reduction?
You may qualify for mortgage modification if:
You occupy your home as a primary residence.
Monthly mortgage is greater than 31% of your monthly gross income.
Loan does not exceed Fannie Mae and Freddie Mac loan limits
I am not behind on my payments but struggling every month, do I need to be behind so I can be eligible? No, you may be eligible if your income is not sufficient to continue with the monthly payment and eventually are at risk of default. Some factors that can be considered are: loss of jobs, reduce work hours, your ARM (Adjusted Rate Mortgage) is expiring and your monthly payment will become unaffordable.
What do I need to do to start with the process? Some mortgage lenders may have already sent letters to those who are qualified. If you have not received anything yet, contact your bank as soon as possible. Some of them have assigned a separate line for this. You will be asked preliminary questions that determine your eligibility and will ask you for supporting documentations such as:
Two recent pay stubs and proof of any other source of income.
Hardship Letter explaining the reason why you cannot make the payment eventually.
Financial Statement loans, credit cards payments and balances, monthly household expenses, checking and savings accounts.
Most recent income tax return.
Some lenders provide some of these forms that you can download from their website.
I have two mortgages; will the program reduce payment on both? No, only the first mortgage is eligible.
I owe more than what my house is worth; will the loan modification also reduce the amount I owe? Lenders are likely to reduce the interest rate which lowers the monthly payment. It is up to your lender’s discretion.
How much does it cost? None. There is no cost for borrowers under the Homeowner Affordability and Stability Plan.
What if my lender does not participate in the program? This is a voluntary basis and loans are evaluated on a case to case basis. With the incentives the government is offering, it is expected that most lenders will participate.
I know my house will be foreclosed soon, is there still hope? Contact your lender if you can still avail of this program. Most lenders may postpone foreclosures on mortgages that may qualify for modification.
Borrowers who are current on their mortgage:
Under the Homeowner Affordability and Stability Plan, eligible borrowers who are current on their payments but cannot refinance to lower their interest rates because of decreased value of their homes may have the opportunity to refinance into fixed rate loan. As of this time, only loans that are secured by Fannie Mae and Freddie Mac are participating in the program; however check with your lenders.
How do I know if I am eligible?
You have sufficient income to make the new payment.
Acceptable mortgage payment history.
Loan secured by Fannie Mae of Freddie Mac.
I owe more than my house is worth. As long as your property will not exceed 105% of the current market value. For example, if your property is worth $200,000 but you owe $210,000 or less, you may qualify.
I have first and second mortgage, do I still qualify? If you owe less than 105% of the market value on the first mortgage, you maybe able to refinance. It depends on your agreement with your lender and your ability to pay.
Will the refinance lower my monthly payment? Borrowers who have high interest rates compared to current market rate will see immediate reduction on their payments. However, those who are paying interest only may not see a significant reduction but a part of the payment will go to the principal.
Will refinancing reduce the amount I owe? No, this helps the borrowers refinance into a safer, more affordable fixed payment.
How do I know if my loan is owned or secured by Fannie Mae or Freddie Mac? Contact you lender.
How can I apply? Lenders are now accepting applications and will ask you to provide the following documentations.
Two recent pay stubs and proof of any other source of income.
Hardship Letter explaining the reason why you cannot make the payment eventually.
Financial Statement loans, credit cards payments and balances, monthly household expenses, checking and savings accounts.
Most recent income tax return.
Some lenders provide some of these forms that you can download from their website.
Remember, the program is only eligible for homes that are currently your primary residence.
(Note: Jocelyn Porteria is a Realtor® licensed in VA. She earned a designation of ABR, Accredited Buyer’s Specialist and a CDPE Certified Distressed Property Expert. For more info, call her at 571-432-8335 or email at ojporteria@yahoo.com)

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