Obama’s Loan Modification Program | Helping Home Owners Modify Mortgages

President Obama announced details about his administration’s $75 billion plan to refinance and modify millions of mortgages; the plan is a portion of the much larger Tarp II plan briefly outlined by Timothy Geithner during his address to the nation on Tuesday February 10, 2008.

If you are a homeowner in trouble of losing your home to foreclosure, or a homeowner that has not missed a payment, but would like to refinance to a lower interest rate, you can officially start calling lenders and asking for a loan modification. The money used for this program comes from the $700 billion approved as part of Tarp I in late 2008.

The $75 billion dollar project deemed Making Home Affordable, pledges to make homeownership more affordable for as many as 9 million Americans. The program uses a combination of government subsidies and incentives (for servicers, lenders and borrowers) in an effort to reduce principals and lower interest rates on millions of American loans. There are two portions of the new Making Home Affordable plan outlined by the Obama administration. 

Photo Credit: LoanWorkout.org

Photo Credit: LoanWorkout.org

Home Affordable Refinance (For Current Homeowners)

The Home Affordable Refinance portion of this plan helps homeowners that have lost value in their home, but are still current on their mortgage payments. It gives borrowers with conforming home loans backed by Freddie Mac and Fannie Mae the ability to refinance their homes with little or no equity. Those of you that could not refinance your mortgage into a lower interest rate loan, because you lacked the necessary equity, may now be able to receive a loan for up to 105% of your home’s market value.

Do You Qualify for the Home Affordable Refinance Program
these qualifications were found on www.financialstability.gov

• Is your home your primary residence?
• Do you have a Fannie Mae or Freddie Mac loan? If you don’t know contact:
• Fannie Mae,

  • 1-800-7FANNIE (8am to 8pm EST).

• Freddie Mac

  • 1-800-FREDDIE (8am to 8pm EST)

• Are you current on your mortgage payments?
• “Current” means that you haven’t been more than 30-days late on your mortgage payment in the last 12 months.
• Do you believe that the amount you owe on your first mortgage is about the same or less than the current value of your house?

Did you answer YES to all of these qualifications? If so, follow this link to figure out the documentation you’ll need for your lender and to learn about next steps.

Home Affordable Modification (For Struggling Homeowners)

The Homes Affordable Modification portion of this program provides incentives to mortgage holders and servicers in exchange for modifying home loans into payments that match 31% of the borrower’s monthly gross income. It is designed to curb millions of foreclosures for families that are struggling to meet financial commitments and on the verge of foreclosure.

This program will not help all struggling homeowners; review the qualifications below to see if you qualify.

• Is your home your primary residence?
• Is the amount you owe on your first mortgage equal to or less than $729,750?
• Are you having trouble paying your mortgage? For example, have you had a significant increase in your mortgage payment OR reduction in your income since you got your current loan OR have you suffered a hardship that has increased your expenses (like medical bills)?
• Did you get your current mortgage before January 1, 2009?

If you answered YES to all of these requirements, visit this link to learn what you can do next to move forward with a loan modification.

J.P. Morgan Chase is lowering interest rates, but not mortgage principals 

Jamie Dimon - CEO Chase JP Morgan

It’s not clear what every bank is doing to modify mortgages, in a recent video featuring Jamie Dimon, CEO of J.P. Morgan Chase, he mentioned that Chase was not modifying the principal of any mortgages; instead, they are lowering interest rates for a period of 5-years. After the 5-year period, the interest rates increase to current levels (around 5%).

Chase estimated that they alone would modify the interest rates on over 600,000 mortgages and that the number may end up closer to 1 million. The question is – will those 600,000 homeowners be in the same situation again in 5 years. If so, are these loan modifications setting our economy up for long-term stability or are they simply another round of adjustable rate mortgages?

Related Resources: 

Making Home Affordable



UK Reuters

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