Mortgages and Modifications 

Homeowner Affordability and Stability Plan

On March 4, 2009, the Obama Administration Made the Following Announcement

The deep contraction in the economy and in the housing market has created devastating consequences for homeowners and communities throughout the country. Millions of responsible families who make their monthly payments and fulfill their obligations have seen their property values fall, and are now unable to refinance to lower mortgage rates. Meanwhile, millions of workers have lost their jobs or had their hours cut, and are now struggling to stay current on their mortgage payments. As a result, as many as 6 million families are expected to face foreclosure in the next several years, with millions more struggling to stay current on their payments.

The present crisis is real, but temporary. As home prices fall, demand for housing will increase, and conditions will ultimately find a new balance. Yet in the absence of decisive action, we risk an intensifying spiral in which lenders foreclose, pushing home prices still lower, reducing the value of household savings, and making it harder for all families to refinance. In some studies, foreclosure on a home has been found to reduce the prices of nearby homes by as much as 9 percent – creating the potential that even borrowers who make every payment suffer from an increase in foreclosures in their community.

The Obama Administration’s Homeowner Affordability and Stability Plan will offer assistance to as many as 7 to 9 million homeowners making a good-faith effort to stay current on their mortgage payments, while attempting to prevent the destructive impact of foreclosures on families and communities. It will not provide money to speculators, and it will target support to the working homeowners who have made every possible effort to stay current on their mortgage payments. Just as the American Recovery and Reinvestment Act works to save or create several million new jobs and the Financial Stability Plan works to get credit flowing, the Homeowner Affordability and Stability Plan will support a recovery in the housing market and ensure that these workers can continue paying off their mortgages.

By supporting low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac, providing up to 4 to 5 million homeowners with new access to refinancing and enacting a comprehensive stability initiative to offer reduced monthly payments for up to 3 to 4 million homeowners, this plan – which draws off the best ideas developed within the Administration, as well as from Congressional housing leaders and Federal Deposit Insurance Corporation Chair Sheila Bair – brings together the government, lenders and borrowers to share responsibility towards ensuring working Americans can afford to stay in their homes.

The basic plan referred to as MHAP(Making Home Affordable Program) has two legs.  The first is a refinance for home owners facing an adjustment in the mortgage interest rate or a change in personal finances that could lead to default. This leg is a change to a long term low interest loan. The second leg is for defaulting loans that provides a modification of the loan to more favorable terms. The following provisions are required:

For Refinancing an Existing Mortgage

1. The loan must be for a one to four unit home.

2. The loan must be a Fannie Mae or Freddie Mac guaranteed mortgage. You can call 1-800-7fannie and 1-800-freddie to find out if you do not know.

3. You must be current on your mortgage payments. Meaning no more then 30 days late in the last twelve months.

4. The home to loan value cannot be more then 125%. In other words if your house is worth $100,000 the new loan cannot exceed $125,000 or if the home is $200,000 the new loan cannot be more then $250,000.

The second program is for those in default. You are late on your mortgage and the bank is threatening to foreclose or has started foreclosure.

1. You are living in the house as your primary residence.

2. The total mortgage is less then $729,750.

3. You have some hardship. The mortgage has adjusted upward. Your income went down. Some reason that the original loan cannot be paid.

4. The current mortgage was completed before January 1, 2009.

5. The total monthly payment is more then 31% of your gross income.

This is just an out line of the Obama plan. You can find this information at www.makinghomeaffordable.gov. But having looked over a number of modifications that have been granted I can say that whether or not you meet the guidelines may be completely irrelevant. Someone who is exactly within the standards can be rejected while someone who fails to meet one or more qualification can get a mortgage modification. This is the problem with a voluntary program as one side has all the discretion and can do as they chose.

Applying for a Mortgage Modification 

If you decide to apply (and after all why not since anyone can at no cost) remember the most important thing you can do is not to give up. The lender will lose your application, send you conflicting information, and try any way to avoid making a decision on your request.

The second thing to remember is that no one can help you better then yourself. Anyone claiming to be able to help you for a fee is just a con artist trying to steal your money. HUD counselors can help to a limited extent, but they are free paid by the government to assist you. You can find a list of counselors at www.hud.gov.

For a free modification information kit click the button on the first page of the site. The kits have basic information and a general form hardship letter. For more information feel free to call our law offices or contact our bankruptcy law firm online.