Financial Recovery Group LLC
Providing Financial Recovery Solutions
NEW GOVERNMENT SPONSORED OPTIONS
HOME AFFORDABLE REFINANCE: (Fannie Mae or Freddie Mac) (Expires June 10, 2010)
This program was announced March 4, 2009 by the U.S. Treasury Department and applies to homes guaranteed by Fannie Mae and Freddie Mac. This program will most likely not be available for most homeowners facing foreclosure or have already received a Lis Pendens. You have to be current on your loan and not been 30 days late making any payments in the past 12 months. It is available on first liens only that originated prior to January 1, 2009 with the principal balance up to $729,750 for 1 unit with higher limits for 2-4 units. The mortgage on the first loan can not be more than 105%. The lender has specific guidelines on getting your loan to 31% of your gross monthly income. The lender can reduce the interest rate down to 2% for 5 years to try and achieve the 31%. After 5 years the interest rate can go up 1%/per year with restrictions. The interest rate may also be affected by the amount of equity in your home. (Example a Home with 10% equity would only give a 5.16% interest rate). (Homeowners with no equity might not qualify for lowered interest rate). If the interest rate can’t achieve 31% the lender still can amortize the loan from 30 to 40 years. If 31% still can not be achieved, then there may be a possibility of principal forgiveness or Hope for Homeowners Refinancing alternatives. If you currently do not have 10-20% equity in your home and you have a high debt to income ratio the lender might not be able to make enough adjustments to qualify you. While it has not been defined, consumers need to be aware their credit scores could be affected during the duration you are in the program especially the first 5 years of fixed interest rates (See Home Affordable Modifications).
HOME AFFORDABLE MODIFICATIONS: (
In order to qualify you must be an owner of a 1-4 unit property 1st lien mortgage that is equal to or less than $729,750 (higher limits for 2 + units) and originated on or before January 1, 2009. Your current mortgage payment including taxes, insurance, and costs the lender paid on your behalf must exceed 31% of your gross (pre-tax) monthly income. You must have experienced a verifiable hardship and you can’t afford your current mortgage. The lender must have signed a contract with the U.S. Treasury Department to participate. First, the lender is required to subtract and waive all of your late fees and place all your past due charges on the back end of the loan to try and achieve a loan value of 31% of gross monthly income. Second, the lender can then lower your interest rate to a bottom rate of 2% (interest rate could be subject to amount of equity in the home… See Home Affordable Refinance above). Next the lender can extend the payment period from 30 to 40 years. If still not at 31%, the lender can institute a principal forbearance reduction that would most likely become a one time balloon payment at the end of the loan (Example: Reduce current loan by $20,000.00 to achieve 31% but require a balloon payment of $20,000.00 after the first loan is paid). Based upon the initial announcement it appears the homeowners will still be stuck with the deficiency balance by placing a majority of the debt on the backend of the loan that is extended another 10 years. If you have less than 10-20% equity in your home based upon today’s market value and have a high debt ratio to finance ratio you may not qualify. While it hasn’t been announced or defined yet, homeowners participating in these government sponsored programs could possibly have their credit scores reduced and or credit frozen for at least 5 years while in the program similar to what credit counseling does to your credit. The Government and Lenders will probably want to make sure homeowners do not take on any additional debt to ensure the highest success rate.
HOPE FOR HOMEOWNERS LOAN REFINANCE: (HUD/FHA) (Expires Sept. 30, 2011)
Borrowers who are current or delinquent on their mortgage that is less than $550,440.00 are eligible if their loan originated on or before January 1, 2008 and have not intentionally defaulted on their loan without a hardship. You must not be able to pay current loan but have made a minimum of (6) six full payments during the life of the loan. You must reside in the property and not have any ownership interest in any secondary homes including rental properties and vacation homes. You must not have been convicted of fraud in the last 10 years and you can’t take out a 2nd mortgage for the first five years. You must agree to share equity created at the start of the loan and any future appreciation with FHA on a sliding scale (Ex: 100% equity for FHA in first year to a minimum of 50% after 5 years). You must certify under penalty of law that you did not knowingly or willingly provide any false material information to obtain the existing mortgage you have. Your current debt to income ratio on all existing mortgages must be greater then 31% of borrower’s gross monthly income. Your new loan will be charged an upfront mortgage insurance premium of 3% and an annual mortgage insurance premium fee of 1.5%. Loans may be extended from 30-40 yrs. Must have at least 3.5% equity if your mortgage payments represent no more than 31% of income and your total debt is below 43% of your income. You may qualify if your mortgage payments represent 38% of your gross income and your total household debt is no more than 50% if you have at least 10% equity in your home. Your lender must have a signed contract with Government to participate. If you have less than 10% equity and very high debt you may not qualify. While it has not been defined, consumers need to be aware their credit scores could be affected during the duration you are in the program especially the first 5 years (See Home Affordable Modifications).
DISCLAIMER: This information was summarized from Websites and Press Releases from various organizations/companies including attorney websites, consumer information websites and lender websites for your convenience. FRG encourages each person to do their own research because results and qualifications can be different for each person’s own unique financial circumstances.