HOME AFFORDABLE MODIFICATION
 Q & A

HOME AFFORDABLE REFINANCE
Q & A

HOME AFFORDABLE PARTICIPATING LENDERS

The Home Affordable Refinance and Modification Programs announced by the U.S. Department of Treasury was designed to slow down the massive foreclosure problem facing the U.S. Economy and homeowners. For the first time, the Government incentivized homeowners who are not currently behind but face increasing risk of future financial problems. This program will probably not be able to help many of the current homeowners facing foreclosure and already in a financial downfall. Most of these homeowners have already maximized their credit cards to try and stay afloat and are now looking at home prices sometimes “de-valued” by 50% or more. This group will probably continue on their foreclosure path and be joined by additional homeowners who will face foreclosure due to job layoffs. Some Industry experts believe this foreclosure crisis will continue on a rollercoaster ride of up and down over the next two years until the market is stabilized. A major part of this program requires most participants to complete credit counseling courses if their total monthly expenses are more than 55% of gross income which is a majority of the homeowners.

Eligibility and Verification for Home Affordable Refinance: (Expires June 10, 2010)

§        First lien loans on owner occupied with unpaid principal balance up to $729,750 (higher limits for owner occupied 2-4 units) that were originated on or before January 1, 2009.

§        Mortgage on the first loan is no more than 105% and is owned or guaranteed by Fannie Mae or Freddie Mac

§        Homeowner is current and have not been 30 days late making a payment within the past 12 months.

§        You are income sufficient to support new mortgage payments.

§        Goal is for loan to be no more than 31% of gross monthly income.

§        First; reduce interest rate to maximum floor rate of 2% to get 31% based upon amount of equity in the home. (Example a Home with 10% equity would only give a 5.16% interest rate). (Homeowner with no equity might not qualify for lowered interest rate).

§        Second; extend amortization of loan from 30 up to a maximum of 40 years.

§        Lastly, principal forgiveness or Hope for Homeowners Refinancing are alternatives.

Eligibility and Verification for Home Affordable Modifications: (Expires December 31, 2012)

§        An owner must be an occupant in a 1-4 unit property.

§        Unpaid principal balance is = or < than $729,750 for 1 unit. (Higher limits for 2 + units).

§        Loan is 1^st mortgage and was originated on or before January 1, 2009.

§        Mortgage payment (including taxes, insurance and homeowner’s association dues) is currently more than 31% of your gross (pre-tax) monthly income.

§        Mortgage payment is not affordable and homeowner experienced major hardship.

§        First; try to get your loan down to 31% of your gross income by waiving late fees and placing all of past  due charges on back end of loan (interest, taxes, insurance and costs lender paid on your behalf).

§        2^nd then try and get the loan down to 31% of your gross monthly income by reducing the interest rate. (Interest rates as low as 2%). (Interest rate could be subject to amount of equity in the home).

§        3^rd if still not to 31% then extend the payment period from 30 to 40 years.

§        4^th if still not at 31% than institute a principal forbearance reduction that most likely would become a one time balloon payment at a later date. (Example: Reduce current loan by $20,000 to achieve 31% but require a balloon payment of $20,000 after the first loan is paid).

Government Incentives to Lenders, Servicers and Homeowners:

§        Government shared costs of reductions in monthly payments with Lenders/Servicers.

§        Paid fees to Lenders/Servicers: Upfront $1,000 and $1,000/yr for each successful year.

§        Homeowners get $1,000 in principal reduction/yr for “on-time” payments and $1,500 for  relocation.

§        One time incentive of $1,500 to Lenders/Investors for modifications on loans still current.

§        Lenders/Servicers must sign contract with Treasury Department

§        After 5 years the decreased interest rate can be gradually stepped up by 1%/year with requirements.

§        Lenders/Servicers get $500 for Deed in Lieu and or Short Sale and $1,000 to extinguish other liens.

§        Upcoming Bankruptcy Legislation giving Judges power to do loan modification and principal reductions.

DISCLAIMER: This information was summarized from Websites and Press Releases from various organizations including Government sponsored websites. FRG anticipates these programs will continue to change and be modified on an ongoing basis. FRG encourages you to review the Federal Government websites at www.Treas.gov or call FHA at 800.CALL.FHA.