Obama Administration's

MAKING HOME AFFORDABLE PROGRAM.

Obama administration's Making Home Affordable Program will offer assistance to as many as 7 to 9 million American home owners. The program can be basically broken down into two sections.

One part is for homeowners who are keeping up with their mortgage payments but can't refinance with their lender because the value of their home has fallen below the amount of the mortgage. Just during the last year home values in Groton dropped 13.4%, in Pepperell 7.7%, in Townsend 8.2%, so this part of the program will affect a lot of homeowners especially those who bought their home in 2004-2007.

The other part of Making Home Affordable Program is for the homeowners facing foreclosure. For those who are at risk of defaulting on their loans, the government will give the lender financial incentives to modify the existing mortgage, reducing the monthly payments so that the homeowner can stay current on the loan and keep their home.

Let's take a look at refinancing option first.

Home Affordable Refinancing Option

Eligible homeowners who are current on their mortgages but could not take advantage of today's low interest rates because their homes lost value, may now be able to refinance into a 30 or 15 year fixed rate loan.

How do you know if you are eligible?

• Your loan must be owned by Fannie Mae or Freddie Mac (Don't know? Call your lender and ask)
• Your home must be your primary residence
• You must have a stable income sufficient to support the new mortgage debt
• You can't take cash out of the new loan to pay other debt

There's another big restriction that will make many homeowners ineligible for the program. Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of your property.

Still, if you do qualify, here's what you get:

• Your mortgage will be refinanced to 30 or 15 years with a fixed interest rate.
• The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender
• In rare cases you may get a principle reduction.

Home Affordable Loan Modification

If you're facing foreclosure and want to "modify" your mortgage to keep your home, you must meet the following criteria:

• Have secured your mortgage before Jan. 1, 2009
• Have a primary mortgage of less than $729,500
• You must live on the property
• Must fully document income with tax returns and pay stubs
• Sign a financial hardship statement
• Go for counseling if your total household debt totals more than 55 percent of income.

If you meet all those qualifications, your lender will then determine how much to lower your monthly payment so it's about 31% of your gross monthly income. The interest rate could be as low as 2%.

Homeowners pay no fees for the modification. However, homeowners could face a balloon payment at the end if your lender reduced your monthly principal payment during the modification. So if your lender reduced your total payments $20,000, you could owe that amount when paid off your loan, refinanced or sold your house.

But there is some financial benefit for the homeowner in the plan. For every month a homeowner makes a payment on time, the Treasury will pay an incentive that reduces the principal balance on a loan. Over five years the total principal reduction could add up to $5,000.

There's also a trial period for the modification.

"The loan servicer gets paid by Fannie (Mae) or Freddie (Mac) after three months," says Summers. "If the homeowner pays the mortgage on time, the servicer gets $1,000 from the government each year for the next three years. If the mortgage is not paid on time in those three months, the deal is over."

And the new loan rate can go up after 5 years. It's only a low in the beginning to help the homeowner dig themselves out.

The plan is in effect until the end of 2012 and can only be used once.

For your FREE confidential consultation please call Natasha at 978-500-0926. We have solutions to every situation!