Do You Qualify For the Government's New Refinancing Plan?
Plan is limited in scope; fewer than 1 million may qualify
10/25/2011 | By Mark Huffman
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ConsumerAffairs.com
| Homeowners
The Obama Administration has announced a new government program to help underwater homeowners – those who owe more than their homes are worth.
The plan is narrow in scope and will only benefit about 1 million homeowners. Whether you are one of them depends on whether you fall into a number of set categories.
First, this is not a mortgage modification program. The government's efforts to help struggling homeowners avoid foreclosure have been less than a resounding success. Rather, this is a refinancing program.
There are many consumers, for example, who purchased homes at the height of the bubble at the prevailing interest rates of the time, between 6 and 7 percent. They may have good jobs and sterling credit, but they have not been able to refinance their 6.5 percent mortgage to the current 4.5 percent rate because the house they purchased for $500,000 is now worth $350,000.
Criteria
But not everyone in this category can take part in the new program. To qualify, you must meet all of the following criteria:
- Your loan must be included in the portfolios held by Fannie Mae and Freddie Mac
- Fannie and Freddie must have acquired your loan before May 31, 2009
- Your current loan must be for more than 80 percent of your home's present value
- You must have made six consecutive monthly mortgage payments (in other words you can't be delinquent)
If you meet these criteria, chances are you can qualify, no matter how far underwater you are. Why would lenders agree to refinance for significantly more than a home is worth? If they do, the government will eliminate their responsibility for problems with the original loan, a significant incentive.
The administration sees the payoff as more homeowners with lower monthly payments, allowing them to spend the money on other things, thus helping the economy. If you think you might qualify, start by discussing it with your loan servicers. Just keep in mind that it may take several months for the program to be launched.
Frank Cole (Tue, 25 Oct 2011 11:22:50 +0000): Assuming that 1 million homeowners can benefit it is unlikely that half of them will even apply, let alone see the process through to the end. A more realistic expectation will be for an 18 to 25 percent full participation rate by those eligible for the program. Average savings for each homeowner under the program would be only $2,500. Another band-aid sized solution, with little anticipated results, to a major wound to our economy, and the housing crisis in particular.
Author Yolanda M Johnson-Bryant (Tue, 25 Oct 2011 21:17:14 +0000): Get in while you can, if you can.
Judy Landon (Tue, 25 Oct 2011 21:30:03 +0000): What I'm afraid of is that the mortgage companies will ask for outrageously high fees and points to refinance the loan, possibly to the extent that there will be little benefit to refinancing. I tried refinancing with my mortgage company a few years ago, and to get a lower rate they wanted 13% of the financed amount.
Kerstin Dice Stoval (Tue, 25 Oct 2011 21:47:45 +0000): Let's hope this one works, even if it only helps a small percentage of homeowners! Having an extra $200-$400 savings a month would make a world of difference for a lot of folks. One thing I want to know is the "job history" that most loans need proof of. Haven't most these folks lost jobs, taken paycuts, taken on extra work that can't provide a "2 year history"? Details, details...
Sue N Jadyn Zager (Wed, 26 Oct 2011 14:12:19 +0000): And for those who have 2 loans..... say the 80/20, where one is held by fannie mae/freddie mac, but the other is not? What about a scenario such as this? I'm afraid that this is going to leave a lot of folks still in trouble.
Marianne Sippel (Sat, 29 Oct 2011 15:40:57 +0000): Why would you need to have a Fannie or a Freddie? And isn't 80% a bit high? And what if you've had a bankruptcy? Seems like not enough people will benefit to make it worth the effort. How about anyone facing a foreclosure gets a review and a refinancing opportunity? The banks still have the money that they were supposed to use to help home owners. Let's stop the torture and get some REAL relief for homeowners.