Home Foreclosure
Summary of Foreclosure Prevention Plan
Under the new program a homeowner not yet in default is expected to qualify for a modified fixed rate mortgage so long as the homeowner can prove:
The mortgage to be refinanced is on the principal residence.
The loan to be refinanced is a conforming loan.
The loan was originated, sold or guaranteed by Fannie Mae or Freddie Mac.
The homeowner is current on their house payments.
The homeowner’s first mortgage is 5% (or less) over the current value of the home.
The mortgage holder holding the second agrees to remain in the second position.
The borrower did not misrepresent their income or expenses in the original loan application.
Under the new program a homeowner already in default or at risk of imminent default is expected to qualify for a modified fixed rate mortgage so long as the homeowner can prove:
The mortgage to be refinanced is on the principal residence.
The mortgage payment exceeds 31% of your gross income, which, according to the plan, automatically puts you at risk of imminent default of your mortgage.
The mortgage loan is conforming.
The homeowner’s current debt-to-income ratio is higher than 38%.
The borrower did not misrepresent their income or expenses in the original loan application.
How do I know if I qualify for a Home Affordable Modification?
To apply for a Home Affordable Modification, you must: be an owner-occupant in a one to four unit property, and have an unpaid principal balance that is equal to or less than $729,750 (for one unit properties and higher for two to four unit properties, a loan that was originated before January 1, 2009, a mortgage payment (including taxes, insurance, and home owners association dues) that is more than 31% of your gross (pre-tax) monthly income, and have a mortgage payment that is no longer affordable, perhaps because of a significant change in income or expenses.
Do I need to be behind on my mortgage payments to be eligible for a Home Affordable Modification?
No. Responsible borrowers who are struggling to remain current on their mortgage payments are eligible if they are at risk of imminent default, for example, because they have had or will soon have a significant increase in their mortgage payment that they cannot afford. If you have had or anticipate a significant increase in your mortgage payment or have had a significant reduction in income, contact your servicer. If you meet the minimum eligibility criteria for a Home Affordable Modification, your servicer is required to evaluate your loan to see if you are at risk of imminent default.
How do I know if my servicer is participating? Are all servicers required to participate?
Servicer participation in the program is voluntary. However, the government is offering substantial incentives to servicers and investors, and it is expected that most major servicers will participate. Participating servicers will sign a contract with Treasury’s financial agent, through which they agree to review every potentially eligible borrower who calls or writes asking to be considered for the program.
As contracts are signed, a list of participating servicers will be available on the Internet at www.FinancialStability.gov. Participation will be mandatory for any servicer that accepts future funding from the Treasury’s Financial Stability Program.
I'm current on my mortgage. Will the Home Affordable Refinance help me?
Eligible borrowers who are current on their mortgages but have been unable to take advantage of today's lower interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan. Through the Home Affordable Refinance program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they placed in mortgage backed securities.
How do I know if I am eligible?
You may be eligible if you: Are the owner occupant of a one to four unit home. The loan on your home is owned or controlled by Fannie Mae or Freddie Mac You are 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.) You believe that the amount you owe on your first mortgage is about the same or slightly less than the current value of your house, and you have a stable income sufficient to support the new mortgage payments.
Who is my “loan servicer?
Your loan servicer is the financial institution that collects your monthly mortgage payments and has responsibility for the management and accounting of your loan. Your servicer may also be your lender, which means they own your loan, however, many loans are owned by groups of investors, such as pension funds or individuals who buy mutual funds. These loans are managed by banks and other firms that specialize in servicing loans. If you have questions about your loan or you are behind on your payments you should call your loan servicer at the number on your payment coupon or monthly mortgage statement.
I owe more than my property is worth. Do I still qualify to refinance under the Making Home Affordable Program?
Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.
I have a first and a second mortgage. Do I still qualify under Making Home Affordable Plan?
As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible for a Home Affordable Refinance. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.
Will refinancing lower my payments?
The objective of the Home Affordable Refinance is to provide creditworthy borrowers who have shown a commitment to paying their mortgage, the opportunity to get into a safe fixed rate mortgage with payments that are affordable today and sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments.
Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate and avoid future mortgage payment increases. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a "Good Faith Estimate" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.
What is the interest rate and other terms of this refinance offer?
The objective of the Home Affordable Refinance is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term 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. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.
Will refinancing reduce the amount that I owe on my loan?
No. The objective of the Home Affordable Refinance is to help borrowers get into safer, more affordable fixed rate loans. Refinancing will not reduce the principal amount you owe to the first mortgage holder or any other debt you owe. However, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.
Can I get cash out to pay other debts?
No. Only transaction costs, such as the cost of an appraisal or title report may be included in the refinanced amount.
How do I apply for a Home Affordable Refinance?
You should call your mortgage servicer or lender and ask about the Home Affordable Refinance application process. The number is on your monthly mortgage bill or coupon book. Please be patient. Lenders and servicers first received the detailed program requirements and it may take time before they are ready to accept applications. In the meantime, it will help your lender and speed up the application process if you gather some information and documents before you call.
What documentation will I need?
It will help your lender if you gather some information and documents before you call. You will need: Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources. You’re most recent income tax return. Information about any second mortgage on the house. Account balances and minimum monthly payments due on all of your credit cards. Account balances and monthly payments on all your other debts such as student loans and car loans.
Will I qualify for a Home Affordable Refinance if I am delinquent on my mortgage?
No. Borrowers who are currently delinquent on their mortgage will not qualify. You should contact your servicer to see if a Home Affordable Modification is an option for you.
What happens after five years? Will my rate go up? Is there a balloon payment?
If the modified interest rate is below the market rate, the modified rate will be fixed for a minimum of five years as specified in your modification agreement. Beginning in year six, the rate may increase no more than one percentage point per year until it reaches the rate cap indicated in your modification agreement. The cap is equal to the prevailing market interest rate on the date the modification is finalized as published by Freddie Mac based on a survey of its customers. This cap means that your rate can never be higher than the market rate on the day your loan was modified. If the modified rate is at or above the prevailing market rate, the modified rate will be fixed for the life of the loan.
How low can my interest rate go?
Treasury is providing incentives to your investor to write the interest down as low as 2%, if necessary to get to a payment that you can afford based on your income. What happens if that is not enough to get to an affordable payment? If a 2% interest rate is does not result in a payment that is affordable (31% of your gross monthly income), your servicer will:
First try to extend your payment term. At the servicer’s option your payments could be extended out to 40 years. If that is still not sufficient your servicer will defer repayment on a portion of the amount you owe until a later time. This is called a principal forbearance. A portion of the debt could be also be forgiven. This is optional on the part of the investor. There is no requirement for principal forgiveness.
Could I end up with a balloon payment?
Yes. If your servicer determines that a principal forbearance is required to get your monthly payment to an affordable level, the amount of the forbearance. Say for example this was $20,000, would be subtracted from the amount used to calculate your monthly mortgage payment, but you would still owe the money. You would have a $20,000 balloon payment that had no interest and was not due until you paid off your loan, refinanced or sold your house.
Got more questions? Get more answers on Foreclosure
Learn and Grow With Our Community
Join the discussion and get new insights and tips on solving life’s troubles with our community. Make a difference; share what you know and join today.
Are you at risk of foreclosure? Get live answers to your mortgage questions by contacting one of the experts below. Learn if you qualify for federal foreclosure relief for defaulting homeowners through the federally sponsored modified fixed rate mortgage program. The intent of the rescue program is to assist homeowners who are either in imminent risk of default on their mortgage or are already in default but have the financial means with federal assistance to get out of default through modification to a fixed rate loan. Learn how to apply for the program and what you will need to know before you contact your loan servicer. For more information and advice on these issues and others, contact one of the experts below.
Summary of Foreclosure Prevention Plan
Under the new program a homeowner not yet in default is expected to qualify for a modified fixed rate mortgage so long as the homeowner can prove:
The mortgage to be refinanced is on the principal residence.
The loan to be refinanced is a conforming loan.
The loan was originated, sold or guaranteed by Fannie Mae or Freddie Mac.
The homeowner is current on their house payments.
The homeowner’s first mortgage is 5% (or less) over the current value of the home.
The mortgage holder holding the second agrees to remain in the second position.
The borrower did not misrepresent their income or expenses in the original loan application.
Under the new program a homeowner already in default or at risk of imminent default is expected to qualify for a modified fixed rate mortgage so long as the homeowner can prove:
The mortgage to be refinanced is on the principal residence.
The mortgage payment exceeds 31% of your gross income, which, according to the plan, automatically puts you at risk of imminent default of your mortgage.
The mortgage loan is conforming.
The homeowner’s current debt-to-income ratio is higher than 38%.
The borrower did not misrepresent their income or expenses in the original loan application.
How do I know if I qualify for a Home Affordable Modification?
To apply for a Home Affordable Modification, you must: be an owner-occupant in a one to four unit property, and have an unpaid principal balance that is equal to or less than $729,750 (for one unit properties and higher for two to four unit properties, a loan that was originated before January 1, 2009, a mortgage payment (including taxes, insurance, and home owners association dues) that is more than 31% of your gross (pre-tax) monthly income, and have a mortgage payment that is no longer affordable, perhaps because of a significant change in income or expenses.
Do I need to be behind on my mortgage payments to be eligible for a Home Affordable Modification?
No. Responsible borrowers who are struggling to remain current on their mortgage payments are eligible if they are at risk of imminent default, for example, because they have had or will soon have a significant increase in their mortgage payment that they cannot afford. If you have had or anticipate a significant increase in your mortgage payment or have had a significant reduction in income, contact your servicer. If you meet the minimum eligibility criteria for a Home Affordable Modification, your servicer is required to evaluate your loan to see if you are at risk of imminent default.
How do I know if my servicer is participating? Are all servicers required to participate?
Servicer participation in the program is voluntary. However, the government is offering substantial incentives to servicers and investors, and it is expected that most major servicers will participate. Participating servicers will sign a contract with Treasury’s financial agent, through which they agree to review every potentially eligible borrower who calls or writes asking to be considered for the program.
As contracts are signed, a list of participating servicers will be available on the Internet at www.FinancialStability.gov. Participation will be mandatory for any servicer that accepts future funding from the Treasury’s Financial Stability Program.
I'm current on my mortgage. Will the Home Affordable Refinance help me?
Eligible borrowers who are current on their mortgages but have been unable to take advantage of today's lower interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan. Through the Home Affordable Refinance program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they placed in mortgage backed securities.
How do I know if I am eligible?
You may be eligible if you: Are the owner occupant of a one to four unit home. The loan on your home is owned or controlled by Fannie Mae or Freddie Mac You are 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.) You believe that the amount you owe on your first mortgage is about the same or slightly less than the current value of your house, and you have a stable income sufficient to support the new mortgage payments.
Who is my “loan servicer?
Your loan servicer is the financial institution that collects your monthly mortgage payments and has responsibility for the management and accounting of your loan. Your servicer may also be your lender, which means they own your loan, however, many loans are owned by groups of investors, such as pension funds or individuals who buy mutual funds. These loans are managed by banks and other firms that specialize in servicing loans. If you have questions about your loan or you are behind on your payments you should call your loan servicer at the number on your payment coupon or monthly mortgage statement.
I owe more than my property is worth. Do I still qualify to refinance under the Making Home Affordable Program?
Eligible loans will include those where the first mortgage will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.
I have a first and a second mortgage. Do I still qualify under Making Home Affordable Plan?
As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible for a Home Affordable Refinance. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.
Will refinancing lower my payments?
The objective of the Home Affordable Refinance is to provide creditworthy borrowers who have shown a commitment to paying their mortgage, the opportunity to get into a safe fixed rate mortgage with payments that are affordable today and sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments.
Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate and avoid future mortgage payment increases. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a "Good Faith Estimate" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.
What is the interest rate and other terms of this refinance offer?
The objective of the Home Affordable Refinance is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term 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. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.
Will refinancing reduce the amount that I owe on my loan?
No. The objective of the Home Affordable Refinance is to help borrowers get into safer, more affordable fixed rate loans. Refinancing will not reduce the principal amount you owe to the first mortgage holder or any other debt you owe. However, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.
Can I get cash out to pay other debts?
No. Only transaction costs, such as the cost of an appraisal or title report may be included in the refinanced amount.
How do I apply for a Home Affordable Refinance?
You should call your mortgage servicer or lender and ask about the Home Affordable Refinance application process. The number is on your monthly mortgage bill or coupon book. Please be patient. Lenders and servicers first received the detailed program requirements and it may take time before they are ready to accept applications. In the meantime, it will help your lender and speed up the application process if you gather some information and documents before you call.
What documentation will I need?
It will help your lender if you gather some information and documents before you call. You will need: Information about the monthly gross (before tax) income of your household, including recent pay stubs if you receive them or documentation of income you receive from other sources. You’re most recent income tax return. Information about any second mortgage on the house. Account balances and minimum monthly payments due on all of your credit cards. Account balances and monthly payments on all your other debts such as student loans and car loans.
Will I qualify for a Home Affordable Refinance if I am delinquent on my mortgage?
No. Borrowers who are currently delinquent on their mortgage will not qualify. You should contact your servicer to see if a Home Affordable Modification is an option for you.
What happens after five years? Will my rate go up? Is there a balloon payment?
If the modified interest rate is below the market rate, the modified rate will be fixed for a minimum of five years as specified in your modification agreement. Beginning in year six, the rate may increase no more than one percentage point per year until it reaches the rate cap indicated in your modification agreement. The cap is equal to the prevailing market interest rate on the date the modification is finalized as published by Freddie Mac based on a survey of its customers. This cap means that your rate can never be higher than the market rate on the day your loan was modified. If the modified rate is at or above the prevailing market rate, the modified rate will be fixed for the life of the loan.
How low can my interest rate go?
Treasury is providing incentives to your investor to write the interest down as low as 2%, if necessary to get to a payment that you can afford based on your income. What happens if that is not enough to get to an affordable payment? If a 2% interest rate is does not result in a payment that is affordable (31% of your gross monthly income), your servicer will:
First try to extend your payment term. At the servicer’s option your payments could be extended out to 40 years. If that is still not sufficient your servicer will defer repayment on a portion of the amount you owe until a later time. This is called a principal forbearance. A portion of the debt could be also be forgiven. This is optional on the part of the investor. There is no requirement for principal forgiveness.
Could I end up with a balloon payment?
Yes. If your servicer determines that a principal forbearance is required to get your monthly payment to an affordable level, the amount of the forbearance. Say for example this was $20,000, would be subtracted from the amount used to calculate your monthly mortgage payment, but you would still owe the money. You would have a $20,000 balloon payment that had no interest and was not due until you paid off your loan, refinanced or sold your house.
Got more questions? Get more answers on Foreclosure
Learn and Grow With Our Community
Join the discussion and get new insights and tips on solving life’s troubles with our community. Make a difference; share what you know and join today.