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Welcome!
There's great news for homeowners regarding loan remodification and refinancing. Here we present the facts to help you understand just what's available. |
Mortgage relief is finally on the way!
Finally, the government is about to start a program to bring some much-needed relief to the housing market. Known as the Federal Stability and Affordability Homeowners Relief Plan, it will help homeowners avoid foreclosure by remodifying their loans to more affordable levels and helping some existing homeowners to take advantage of lower mortgage rates by refinancing their existing loans.
The plan has two parts: loan remodification and loan refinancing. Read on to learn more about each. |
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Loan Remodification 
Let's talk about loan remodification first.
What type of loans will qualify?
All loans including Fannie Mae and Freddie Mac. The remodifications will lower the interest rate, may lengthen the term of the loan, but will not change the principal balance.
Who will qualify?
You must be an owner-occupant living in the property as your principal residence; it can be a one-to-four unit with a loan limit of up to $729,750 and you must have a mortgage payment that is more than 38% of your gross monthly income. You can also be in default, in foreclosure, or current on your loan but in danger of defaulting.
What if you have a second mortgage?
You can still qualify if you have a second mortgage, but only the first mortgage will be modified.
What is the process?
First, the lender will apply a "net present value" test to the property to see if it is economically better to remodify the loan or just let it foreclose.
Next, you will have to provide the lender documents including pay stubs, tax returns, your account balances, your loan balances, etc. to see if you qualify.
Once you qualify, the lender will start the process and begin to add any late fees or penalties on your existing loan to the new loan.
Next, the lender will determine what interest rate your new loan needs to be in order to get your monthly mortgage payments down to 31% of your gross monthly income. They can do this by bringing down your interest rate to as low as 2%, and if needed extend the term of your new loan to 40 years. They can even defer part of the principal or even forgive part of the principal balance.
Once you have the loan, a three-month trial period will start. If you stay current on your new loan for that period of time, it will then be fixed for a 5-year period. The lender will be given a cash incentive of up to $1,000 for giving you the new modification. For each year you stay current during the five years, you will be given a bonus payment of $1,000 each year that will reduce your principal balance.
After 5 years, the interest rate on the loan will start to increase by 1% per year until your new loan's interest rate gets to the market rate. Once there, your loan will be fixed at that rate for the remainder of the term on your loan.
Some things that are important:
What's considered in monthly mortgage payments: Principal, Interest, Insurance, Taxes, HOA dues.
What's considered in your gross income: Wages, Salary, Tips, Overtime, Commissions, Social Security payments, Pensions, Passive income.
The program starts immediately and ends on December 31, 2012. For general information about the plan go to financialstability.gov. To apply, call your loan servicer or call 1.888.995.4673. |
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Refinancing 
The second part of the plan involves the refinancing of existing home loans.
What loans qualify?
Only Fannie Mae and Freddie Mac loans qualify which means that the dollar limits currently are set at $417,000 or below. At the same time your first mortgage cannot exceed 105% of your home's market value.
The home must be owner-occupied and used as your principal residence.
What if I have a second mortgage?
You can have a second mortgage and still qualify but only the first mortgage will be refinanced unless the second lender allows the second to be rolled into the first mortgage.
What is the process?
You will need to provide documentation to your lender including income statements, pay stubs, tax returns, second mortgage information (if applicable), account balances and loan balances, etc. in order to be qualified.
What will the new loan look like?
All the refinanced loans will be 15 or 30-year fixed loans at existing market rates. All the points and fees, like title and appraisal, will be put into the new loan and there will be no pre-payment penalties or balloon payments allowed. There can be no cash out refinances and you will only be allowed to refinance once under this program.
The program ends in June of 2010. For general information, go to financialstability.gov. To start the process, which should be in place by April 1, 2009, get in touch with your loan servicer or contact:
Fannie Mae at 1.800.732.6643
Freddie Mac at 1.800.373.3343 The good news in all of this is that it should save approximately one million homeowners from foreclosure and help another 500,000 people to refinance their existing loans. That is a positive for the housing market and means that we will get back to a traditional market just that much sooner. |
Sonoma County Sales Stats: 2006 - 2009
Source: BAREIS: MLS: 3/18/09 | |
| About Frank Howard Allen
Since 1910, Frank Howard Allen has been a part of North Bay community life, providing the highest level of professional service while staying committed to giving back to local non-profits. Today, with more than 20 offices and over 600 agents, Frank Howard Allen ranks among the top 50 largest independent real estate companies nationwide, and is the largest independent real estate company focused exclusively on serving the North Bay. Voted "Best Real Estate Company" for seven years in a row by the readers of NorthBay biz magazine, Frank Howard Allen is large enough to offer comprehensive services and resources, yet small enough to provide extraordinary personalized care. For more information, visit: fhallen.com. |
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