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Questions
and Answers for Borrowers about the
Homeowner Affordability and
Stability Plan
LINK
Borrowers Who Are Current on Their Mortgage Are Asking:
1. What
help is available for borrowers who stay current on their mortgage payments but
have seen their homes decrease in value?
Under the Homeowner Affordability and Stability Plan, eligible
borrowers who stay current on their mortgages but have been unable to refinance
to lower their 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 program, Fannie Mae and Freddie Mac will allow the refinancing of
mortgage loans that they hold in their portfolios or that they placed in
mortgage backed securities.
I
owe more than my property is worth, do I still qualify to refinance under the
Homeowner Affordability and Stability Plan?
Eligible loans will now include those where the new first mortgage
(including any refinancing costs) 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.
How
do I know if I am eligible?
Complete eligibility details will be announced on March 4th when
the program starts. The criteria for eligibility will include having sufficient
income to make the new payment and an acceptable mortgage payment history. The
program is limited to loans held or securitized by Fannie Mae or Freddie Mac.
I
have both a first and a second mortgage. Do I still qualify to refinance under
the Homeowner Affordability and Stability 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 to refinance under the Homeowner Affordability and Stability Plan.
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 Homeowner Affordability and Stability Plan is
to provide creditworthy borrowers who have shown a commitment to paying their
mortgage with affordable payments
that are 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. 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.
6.
What are the interest rate and other terms of this refinance offer?
The
objective of the Homeowner Affordability and Stability Plan 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.
7.
Will refinancing reduce the amount that I owe on my loan?
No.
The objective of the Homeowner Affordability and Stability Plan is to help
borrowers refinance into safer, more affordable fixed rate loans. Refinancing will
not reduce the amount you owe to the first mortgage holder or any other debt
you owe. However, by reducing the interest rate, refinancing should save you
money by reducing the amount of interest that you repay over the life of the
loan.
8.
How do I know if my loan is owned or has been securitized by Fannie Mae or
Freddie Mac?
To
determine if your loan is owned or has been securitized by Fannie Mae or
Freddie Mac and is eligible to be refinanced, you should contact your mortgage
lender after March 4, 2009.
9.
When can I apply?
Mortgage
lenders will begin accepting applications after the details of the program are
announced on March 4, 2009.
10. What should
I do in the meantime?
You
should gather the information that you will need to provide to your lender
after March 4, when the refinance program becomes available. This includes:
- Information
about the gross monthly income of all borrowers, including your most recent pay
stubs if you receive them or documentation of income you receive from other
sources
- your
most recent income tax return
- information
about any second mortgage on the house
- payments
on each of your credit cards if you are carrying balances from month to month,
and
- payments
on other loans such as student loans and car loans.
Borrowers
Who Are at Risk of Foreclosure Are Asking:
1.
What help is available for borrowers who are at risk
of foreclosure either because they are behind on their mortgage or are
struggling to make the payments?
The
Homeowner Affordability and Stability Plan offers help to borrowers who are
already behind on their mortgage payments or who are struggling to keep their
loans current. By providing mortgage lenders with financial incentives to
modify existing first mortgages, the Treasury hopes to help as many as 3 to 4
million homeowners avoid foreclosure regardless of who owns or services the
mortgage.
Do I need to be
behind on my mortgage payments to be eligible for a modification?
No.
Borrowers who are struggling to stay current on their mortgage payments may be
eligible if their income is not sufficient to continue to make their mortgage
payments and they are at risk of imminent default. This may be due to several
factors, such as a loss of income, a significant increase in expenses, or an
interest rate that will reset to an unaffordable level.
How do I know if
I qualify for a payment reduction under the Homeowner Affordability and
Stability Plan?
In
general, you may qualify for a mortgage modification if (a) you occupy your
house as your primary residence; (b) your monthly mortgage payment is greater
than 31% of your monthly gross income; and (c) your loan is not large enough to
exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will
be determined by your mortgage lender based on your financial situation and
detailed guidelines that will be available on March 4, 2009.
I do not live in the house that secures
the mortgage I'd like to modify. Is this mortgage eligible for the Homeowner
Affordability and Stability Plan?
No.
For example, if you own a house that you use as a vacation home or that you
rent out to tenants, the mortgage on that house is not eligible. If you used to
live in the home but you moved out, the mortgage is not eligible. Only the
mortgage on your primary residence is eligible. The mortgage lender will check
to see if the dwelling is your primary residence.
5.
I have a mortgage on a duplex. I live in one unit and rent the other. Will I
still be eligible?
Yes.
Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one
unit as your primary residence.
6.
I have two mortgages. Will the Homeowner Affordability and Stability Plan
reduce the payments on both?
Only
the first mortgage is eligible for a modification.
7.
I owe more than my house is worth. Will the Homeowner Affordability and
Stability Plan reduce what I owe?
The
primary objective of the Homeowner Affordability and Stability Plan is to help
borrowers avoid foreclosure by modifying troubled loans to achieve a payment
the borrower can afford. Lenders are likely to lower payments mainly by
reducing loan interest rates. However, the program offers incentives for
principal reductions and at your lender's discretion modifications may include
upfront reductions of loan principal.
8.
I heard the government was providing a financial incentive to borrowers. Is
that true?
Yes.
To encourage borrowers who work hard to retain homeownership, the Homeowner
Affordability and Stability Plan provides incentive payments as a borrower
makes timely payments on the modified loan. The incentive will accrue on a
monthly basis and will be applied directly to reduce your mortgage debt.
Borrowers who pay on time for five years can have up to $5,000 applied to
reduce their debt by the end of that period.
9.
How much will a modification cost me?
There
is no cost to borrowers for a modification under the Homeowner Affordability
and Stability Plan. If you wish to get assistance from a HUD-approved housing
counseling agency or are referred to a counselor as a condition of the
modification, you will not be charged a fee. Borrowers should beware of any
organization that attempts to charge a fee for housing counseling or modification
of a delinquent loan, especially if they require a fee in advance.
10. Is my lender required to
modify my loan?
No.
Mortgage lenders participate in the program on a voluntary basis and loans are
evaluated for modification on a case-by-case basis. But the government is
offering substantial incentives and it is expected that most major lenders will
participate.
11.
I'm already working with my lender / housing counselor on a loan workout.
Can I still be considered for the Homeowner Affordability and Stability Plan?
Ask
your lender or counselor to be considered under the Homeowner Affordability and
Stability Plan.
12.
How do I apply for a modification under the Homeowner Affordability and
Stability Plan?
You
may not need to do anything at this time. Most mortgage lenders will evaluate
loans in their portfolio to identify borrowers who may meet the eligibility
criteria. After March 4 they will send letters to potentially eligible
homeowners, a process that may take several weeks. If you think you qualify for
a modification and do not receive a letter within several weeks, contact your
mortgage servicer or a HUD-approved housing counselor. Please be aware that
servicers and counseling agencies are expected to receive an extraordinary
number of calls about this program.
13. What should
I do in the meantime?
You
should gather the information that you will need to provide to your lender on
or after March 4, when the modification program becomes available. This
includes
- information
about the monthly gross income of your household including recent pay stubs if
you receive them or documentation of income you receive from other sources
- your
most recent income tax return
- information
about any second mortgage on the house
- payments
on each of your credit cards if you are carrying balances from month to month,
and
- payments
on other loans such as student loans and car loans.
14. My loan is scheduled for foreclosure soon. What
should I do?
Contact your mortgage
servicer or credit counselor. Many mortgage lenders have expressed their
intention to postpone foreclosure sales on all mortgages that may qualify for
the modification in order to allow sufficient time to evaluate the borrower's
eligibility. We support this effort.