Qualifications for the Mortgage Bailout Plan

In previous blogs, I have discussed the two parts of President Obama's new mortgage bailout plan: The loan modification plan and the loan refinancing plan.

I have decided that I would like to break down what qualifes you and what doesn't for each of these components.

Option Number 1: Loan Modification

Qualify

• Have payments of more than 31% of pretax monthly income and can prove hardship.
• Occupy a single-family home
• Can prove the home is a primary residence
• Have an unpaid principal balance of $729,750**
• Make all modified payments over a trial period of three months or more.

Don't Qualify

• Aren't about to default.
• Investor with a home that isn't owner-occupied.
• Have a home that is vacant or condemned.
• Have an unpaid principal balance of more than $729,750.**
• Have a mortgage packaged into securities whose rules explicitly forbid modification.
• Have loan officers who can't be reached or are unwilling to consider modification.

Option Number 2: Loan Refinancing Plan

Qualify

• Have loans owned or guaranteed by Fannie Mae or Freddie Mac.
• Are current on mortgage payments.
• Can prove the ability to afford the new mortgage.
• Mortgage balance of no more than 105% of the current estimated home value.

Don't Qualify

• Have loans owned or guranteed by a company other than Fannie Mae or Freddie Mac.
• Have been more than 30 days late on a payment during the previous 12 months.
• Can't afford the new mortgage debt.
• Home value has fallen so far that the loan is more than 105% of the home's worth.

**For a first lien on s one-unit home

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Making Homes Affordable Plan Part II

A few days ago, I wrote the first of two parts on the Homeowner Affordability & Stability plan that was released by the Obama administration on Wed March 4th. As we know, it contains two major parts that will have an impact on assisting homeowners with a troubled mortgage situation. The first part of the plan is a modification program that Servicers will offer to borrowers with high debt-to-income ratios or who are at risk of foreclosure. The second part of the plan which I am blogging about today, is a refinance program for existing Fannie Mae or Freddie Mac loans.

1st Metropolitan Mortgage CEO, Daniel Jacobs and others are still assessing the details of the Homeowner Affordability & Stability plan to determine our next steps, but in the mean time we are trying to provide a summary of its major points so that it might help other to better understandable it.

So here we go:
The second part of the plan is a refinance program for existing Fannie Mae or Freddie Mac loans. Fannie Mae is offering two different programs:

1. The Refi Plus Program that requires the servicer of the loan to be the originating lender.
   
2. The DU Refi Plus Program (DU is the Automated Underwriting System for Fannie Mae) that allows any lender using DU to originate the loan as long as the existing loan is a Fannie Mae loan.
   

Freddie Mac requires the servicer of the loan to be the originating lender. Some specifics of the program are:

• Existing mortgage must currently be a Fannie or Freddie loan.
• Existing loan may not be considered ineligible (must get an Approved/Eligible from DU).
• Ineligible loans include existing mortgage loans that received a DU Expanded approval (EA).
• Maximum LTV for 1-2 unit properties is 105% and require an appraisal.
• Maximum LTV for 3-4 unit properties is 80% and also require an appraisal.
• No maximum CLTV.
• Existing mortgage must be current and have acceptable mortgage payment history. No minimum FICO score is required although borrower must meet bankruptcy and foreclosure requirements. In addition, borrower must demonstrate credit worthiness.
• Rate and term refinance only (No Cash Out) - purchase money seconds MAY Not be included.
• Loan level price adjustments (points) will apply (determined by credit score on credit report)
• MI required (same coverage factor of existing loan) for mortgage loans that had original LTV’s greater than 80%.
• DU Refi Plus must receive Approve/Eligible and will not be available until April 4. Income and employment verification is required.
• Refi Plus is a manual underwrite and requires verbal verification of employment. Lender must determine that the borrower has a reasonable ability to repay the mortgage based on current information provided by borrower.

There it is in a nut shell. I feel this part of the plan stands a chance to actually help those who have good credit and have little to no equity in their property. This offers a second option, to use FHA, which will allow a borrower to go to a 96.5% LTV on a No Cash Out Refi.

Information on the New Presidential Making Home Affordable Plan

I have been asked many questions about President Obama's Homeowner Affordability and Stability Plan, and would like to share some information regarding the plan and how it will work. Like many government programs and documents, the plan may be hard to understand sometimes. Let me break it down for you:

President Obama's Homeowner Affordability and Stability Plan can help you refinance your home, 105% of its value.

The program is broken doen into two (2) areas:

1. The Home Affordable Refinance
2. The Home Affordable Modification

The Home Affordable Refinance

Qualifications:

• If the home you want to refinance is your primary residence,
• The loan on your home is controlled by Fannie Mae or Freddie Mac (it must be a conforming loan — you can call Fannie at 1-800-7FANNIE and Freddie at 1-800-FREDDIE or submit online forms with Fannie and Freddie)
• If you’re current on your mortgage payments (meaning you haven’t been more than 30 days late on your mortgage in the last 12 months)
• If you have sufficient income to support a new mortgage….. then, you might qualify.

It gets a little more complicated however: You can’t be too far underwater on your mortgage (owe more than the home’s market value) to qualify for the refinance.

What Do I Need to Provide?

• If you think you might qualify to refinance, you’ll need to give the following documents to your mortgage lender:
• Your monthly gross (before taxes) income of your household, including recent pay stubs.
• Your last income tax return.
• Information about any second mortgage on the house (you can only refinance your first mortgage under the plan, but having a second mortgage won’t automatically exclude you).
• Account balances and minimum monthly payments due on all your credit cards.
• Account balances and minimum monthly payments for all your other debts, like student loans or car loans.

How Will They Decide What My Home is Worth Today?
This part of the Obama housing plan has not been released yet. It’s possible that lenders are expected to use their traditional procedures, but it hasn’t been officially stated.

When Will This Help Me? When it comes to refinancing under the Making Home Affordable plan, patience is going to be a virtue. With so many homeowners in some sort of distress (one in six American homeowners has negative equity, and foreclosures and home values fell 11.6% nationwide last year), there is likely to be a flood of applications and queries for lenders.

What If I Don’t Qualify to Refinance?
Don't give up. You may still qualify for other programs.

Why 2009 is a Great Year to Buy Real Estate

We all know the real estate market has recently had its fair share of ups and downs. The sub-prime loan disaster has hit real estate hard, but there's good news: A recovery is around the corner.

It's predicted by economic analysts that 2009 will be a great year to buy real estate. In spite of this economic disaster the real estate market goes in cycles. Economists have been observing it for decades. Ever 3-5 years the market peaks, and then drops. After a few years, it's ready to roll again.

Of course, cycles change and we can't base everything on past observations. Just look at the economy in the last few months. Things are starting to turn for the better. Recent months have seen growing consumer confidence and a drop in prices of oil and other daily goods.

Right now, the government is trying to stimulate the economy. This means that interest rates are as low as they might be for years. Another bit of good news is that housing prices are low right now. These changes are just starting to take effect, so it is likely that the middle and later part of 2009 will be an even better time to buy real estate.

The trick to buying real estate and getting a great deal in '09 is that you really have to qualify for the loan. What got us into this whole mess in the first place were bad loans and too much government de-regulation. From now on, you'll have to really be economically viable, meaning
you have a job and a steady work history.It also means you have your credit and finances together.

Despite the recent negativity, I am more than positive that this year will be a great one for buying and selling real estate.