The “Making Home Affordable Plan” was created to help two groups of homeowners:
- People who are making their mortgage payments, but were unable to qualify for refinancing in the past because they owe more on their house than it’s currently worth.
- People who are at risk for imminent foreclosure.
Making Home Affordable Plan One: You owe more on your home than it’s worth.
If you owe more than your home is worth (also known as negative equity or “being underwater”), the new Obama housing plan offers a special refinancing program known as the Making Home Affordable Refinance Plan. (This plan is called DU Refi Plus™ at Fannie Mae and Relief RefinanceSM at Freddie Mac.)
The Making Home Affordable Plan will allow more than 5 million people who didn’t qualify for a mortgage in the past to refinance.
To qualify:
- You need to have a Fannie Mae or Freddie Mac mortgage.
- You need to have satisfactory credit.
- You can now have up to 105% loan-to-value (meaning you can now owe as much as 105% of your home’s current value).
- You can’t refinance for more than the amount of the mortgage (no cash out).
- If your current loan doesn’t have PMI (Private Mortgage Insurance), then PMI will NOT be required on the new loan.
- This program differs from a “regular refi” by benefiting:
- People who cannot qualify for a traditional refi because they do not have enough equity.
- People who would have had to pay Private Mortgage Insurance with a traditional refi.
If you are having problems making your payments and are at risk of foreclosure, the plan provides a special loan modification program for troubled homeowners.
A loan modification is exactly what it sounds like – a lender modifies the terms of your original loan, typically to reduce your interest rate or payment. In this program, your mortgage rate would be reduced for five years.
It’s important to note that the loan modification program in this plan is intended to help keep the most troubled homeowners in their homes. It is not for people who can currently pay their mortgages. The new requirements are very specific.
To qualify for a loan modification under the Making Home Affordable Plan, you will have to:
- Prove in writing that you have a serious hardship that is preventing you from making your mortgage payment, or that your income has dropped significantly, or your rate or payment increased drastically.
- Document all of your personal expenses, income and assets, to prove that you are unable to pay your mortgage.
- Depending on your situation, you may be required to receive financial counseling as a condition of participating in the program.
A few other things to know about Making Home Affordable Plan
If you’re in a situation where you are in default or at risk of default, The Making Home Affordable Plan may help you keep your home by:
- Reducing your interest rate (as low as 2%).
- Extending the term of your loan up to 40 years.
- Allowing you to forbear principal.
