Financial Stability--Save My House (Do I Qualify?)

With all of the news it makes everyone think--- Hey, we have new rules and a new way to get the job done. WRONG!

I have gotten numerous calls about the new housing reforms and what is currently available. From what I have gathered the following rules reign true:

• Home-owner's can refinance Fannie Mae and Freddie Mac loans without appraisal in some instances making the value of the home a non-issue.
• Home-owner's will have mortgage insurance if the loan is over 80% of the value in the home.
• Current mortgage servicers will be the ones refinancing as it currently stands or modifying the borrower's current loan.

One caller yesterday actually informed me that she was to get no mortgage insurance, a rate of 4.25%, and could go to 105% in the value of her home. I advised her that no where did I see anything about not paying mortgage insurance, nor the given that she was to obtain a 4.25% rate at little to minimal cost.

If you have personally been affected, or either know of someone who is at risk, then please visit www.financialstability.gov. This site has many questions and answers and allows borrowers to input information to see if they qualify.

Also, please review the "Making Home Affordable" information from the U.S. Treasury I am including below:

The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. .... The program will allow much flexibility in getting loans through... The Home Affordable Refinance program ends in June 2010.

Whereas, when a modification is required. The Home Affordable Modification program will help up to 3 to 4 million at-risk homeowners avoid foreclosure by reducing monthly mortgage payments.

Eligibility and Verification (taken from the U.S. Treasury Announcement)

• Loans originated on or before January 1, 2009.
• First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750. Higher limits allowed for owner-occupied properties with 2-4 units.
• All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship.
• Property owner occupancy status will be verified through borrower credit report and other documentation; no investor-owned, vacant, or condemned properties.
• Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default.
• Modifications can start from now until December 31, 2012; loans can be modified only once under the program.

Loan Modification Terms and Procedures (taken from the U.S. Treasury Announcement)

• Participating servicers are required to service all eligible loans under the rules of the program unless explicitly prohibited by contract; servicers are required to use reasonable efforts to obtain waivers of limits on participation.
• Participating loan servicers will be required to use a net present value (NPV) test on each loan that is at risk of imminent default or at least 60 days delinquent. The NPV test will compare the net present value of cash flows with modification and without modification. If the test is positive

- meaning that the net present value of expected cash flow is greater in the modification scenario - the servicer must modify absent fraud or a contract prohibition.

• Parameters of the NPV test are spelled out in the guidelines, including acceptable discount rates, property valuation methodologies, home price appreciation assumptions, foreclosure costs and timelines, and borrower cure and redefault rate assumptions.
• Servicers will follow a specified sequence of steps in order to reduce the monthly payment to no more than 31% of gross monthly income (DTI).
• The modification sequence requires first reducing the interest rate (subject to a rate floor of 2%), then if necessary extending the term or amortization of the loan up to a maximum of 40 years, and then if necessary forbearing principal. Principal forgiveness or a Hope for Homeowners refinancing are acceptable alternatives.

If we are going to save this country loans have to fixed, banks have to be able to lend money, and homes have to sell. Let us all hope that we are looking at a better year with these changes. The biggest positive changes seem to be in reducing the allowed monthly debt expenditures and allowing only one modification to an existing loan.

*Information reported from www. financialstability.gov and from "Making Home Affordable Guidelines" which covered the second half of this piece via the U. S. Treasury.