My broker received the following email, printed it out and gave me a caopy. I felt the following information is important enough to get out there to all of you homebuyers here in Shasta County:
President Obama’s new real estate rescue plan offers two key possible benefits: Mare refinancing opportunities and greater chance for a loan modification.
NEW YORK CNNmoney.com)–The eagerly anticipated foreclosure prevention progrom unveiled Wednesday by President Obama targets 9 million borrowers for help- are you one of them?
The $75 billion effort, dubbed the Homwowner Affordability and Stability Plan, boils down to two basic solutions:
First, the government is aiming to help more homeowners refinance to take advantage of new low interest rates.
Second, it provides incentives to lenders and servicers to restructure your mortgage to more affordable levels.
Official guidelines won’t be unveiled until March 4, but here’s how to know whether you’ll likely be able to take advantage of either of these options.
Help for those seeking refinancing
This part of the program targets borrowers who have kept current on their mortgages. Many of the homeowners in this group have been unable to lower their housing costs through refinancing because of falling home prices.
Right now, if you’re underwater on your mortgage, owing more than the home’s market value, forget about qualifying for a refi. In fact, at least 20% equity in your home is now a must, unless you’re using an FHA loan.
The new guidelines should help. Even homeowners with debt that exceeds home value by 5% could be eligible. And there will be no prepayment penalities. But your loan must be owned or backed by Fannie Mae or Freddie Mac.
The Administration estimates that this will enable up to 5 million homeowners to obtain lower interest rate mortgages.
Who’s not eligible. Homeowners whose property values have dipped severly, putting them underwater by more than 5% are out of luck.
Those with “jumbo” mortgages also don’t qualify – only those with “conforming” mortgages do. To be absolutely sure what kind of loan you have, you need to check with your servicer or lender after March 4. But in general, unitl the past year, loans above $417,000 were considered jumbo mortgages, and Fannie Mae and Freddie Mac were not allowed to buy and guarantee them.
All borrowers will have to prove they have sufficient income to be able to keep their loan payments, though what would be sufficient proof wasn’t yet clear.
Mortgage modification help for at-risk borrowers
Homeowners in default or at risk of default may qualify for loan modifications, which restructure the terms of loans.
Anyone wiht high combinedd mortgage debt compared to income or who is underwater may be eligible for a loan modification.
Borrowers with high levels of debt, such as car loans and credit card debt exceeding 55% of their incomes, may still qualify for a modification but they’ll be required to accept debt counseling in a HUD certified program.
If you qualify, your servicer or lender will reduce your monthly mortgage payments to 31% of your gross income.
The payment would stay there for five years and then gradually revert back to the conforming loan rates in place at the time.
The reduction would come mostly through interest-rate reductions, though in some cases, principle reduction also would be an option.
Borrowers would also receive incedntive bonuses of up to $1,000 a year for five years for making payments on time.
President Obama estimated 3 to 4 million homeowners could benefit from the new modification procedures.
Who’s not eligible. Speculators, those who bought homes for investment purposes, do not qualify for help-all homes must be owner occupied.
The program will also not reward homebuyers who were irresponsible in their borrowing. All applicants will be closely examined by lenders and those who acted unscrupulously by, for example, misrepresenting their incomes in no-doc loan applications, would not qualify.
And, in order to protect taxpayers from excessive expenses, no loans will be modified unless it results in a net savings compared with the costs of foreclosing. Finally, rates would not be lowered below 2%.
That will disqualify many borrowers who simply can’t afford any reasonable mortgage payment because of illness, for example, or job loss.
“[The plan} will not reward folks who bought homes they knew from the beginning they would never be able to afford,’ said Obama. “In short, this plan will not saver every home.”
No mortgages for amounts above conforming loan limits would be eligible.
guidelines when it comes time to home shopping. There are plenty of lenders to work with here in Shasta County, go out there and find one you are comfortable with and go with them. Your real estate agent will be able to find you homes within your price range – that way you don’t have to worry about falling in love with a home and then finding out later on that you can’t afford it.