Making Home Affordable Is Law

The Making Home Affordable Program has been passed into law and an expected 7 to 9 million homeowners should benefit from it. There are two ways for at-risk homeowners to benefit. The first is the Home Affordable Refinance and the second is the Home Affordable Modification.

The Home Affordable Refinance program will be available to homeowners with a good payment history on their existing Fannie Mae or Freddie Mac mortgage. Under this program homeowners will be eligible to refinance up to 105% of their current home value to today's lower mortgage rates. This program ends in June 2010.

For those that don't qualify for the Home Affordable Refinance program there is the Home Affordable Modification Program. The servicers of these loans are encouraged to work with homeowners to modify their mortgages so that at-risk homeowners can better afford their payments. Institutions that received TARP (Troubled-Asset-Relief-Program) money are required to work with homeowners whose loans they service.

The modification program is available to those who live in their homes and took out their mortgage prior to January 1, 2009. Modifications can be done through this program until December 31, 2012 and a homeowner can only modify his or her loan once.
The loan servicer will first seek to reduce the interest rate (subject to a rate floor of 2%). Then, if necessary, the lender will seek to extend the term of the mortgage up to a maximum of 40 years. Finally, as a last resort, the lender can forgive a portion of the mortgage owed in order to achieve a goal of a mortgage payment that represents 31% of the homeowners' gross monthly income.

Key distinctions to remember are as follows:

• The loan must be a Fannie Mae or Freddie Mac loan.
• All refinances or modifications require full documentation of income.
• The home must be occupied by the homeowner. No investment properties allowed.
• Loan payments must be current with no past late payments allowed.

There are more provisions to the program than I covered here and I enourage you to visit my Borrow Smart website at www.iborrowsmart.com/sperkins for all the details. Just click here to go to the website where you will find NIFE (National Institute of Financial Education) Classes you can view and listen to that give all the details you will need including guidelines and qualifications you can download. As always feel free to call me or e-mail me with any questions.