Friday, March 27, 2009

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

  • 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


  • 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