Questions and Answers for Borrowers about the Homeowner
Affordability and Stability Plan
Borrowers Who Are Current on Their Mortgage Are Asking:
1. What help is available for borrowers who stay current on their
mortgage payments but have seen their homes decrease in value?
Under the Homeowner Affordability and Stability Plan, eligible
borrowers who stay current on their mortgages but have been
unable to refinance to lower their interest rates because their
homes have decreased in value, may now have the opportunity to
refinance into a 30 or 15 year, fixed rate loan. Through the
program, Fannie Mae and Freddie Mac will allow the refinancing of
mortgage loans that they hold in their portfolios or that they
placed in mortgage backed securities.
2. I owe more than my property is worth, do I still qualify to
refinance under the Homeowner Affordability and Stability Plan?
Eligible loans will now include those where the new first
mortgage (including any refinancing costs) will not exceed 105%
of the current market value of the property. For example, if your
property is worth $200,000 but you owe $210,000 or less you may
qualify. The current value of your property will be determined
after you apply to refinance.
3. How do I know if I am eligible?
Complete eligibility details will be announced on March 4th when
the program starts. The criteria for eligibility will include
having sufficient income to make the new payment and an
acceptable mortgage payment history. The program is limited to
loans held or securitized by Fannie Mae or Freddie Mac.
4. I have both a first and a second mortgage. Do I still qualify
to refinance under the Homeowner Affordability and Stability
Plan?
As long as the amount due on the first mortgage is less than 105%
of the value of the property, borrowers with more than one
mortgage may be eligible to refinance under the Homeowner
Affordability and Stability Plan. Your eligibility will depend,
in part, on agreement by the lender that has your second mortgage
to remain in a second position, and on your ability to meet the
new payment terms on the first mortgage.
5. Will refinancing lower my payments?
The objective of the Homeowner Affordability and Stability Plan
is to provide creditworthy borrowers who have shown a commitment
to paying their mortgage with affordable payments that are
sustainable for the life of the loan. Borrowers whose mortgage
interest rates are much higher than the current market rate
should see an immediate reduction in their payments. Borrowers
who are paying interest only, or who have a low introductory rate
that will increase in the future, may not see their current
payment go down if they refinance to a fixed rate. These
borrowers, however, could save a great deal over the life of the
loan. When you submit a loan application, your lender will give
you a "Good Faith Estimate" that includes your new interest rate,
mortgage payment and the amount that you will pay over the life
of the loan. Compare this to your current loan terms. If it is
not an improvement, a refinancing may not be right for you.
6. What are the interest rate and other terms of this refinance
offer?
The objective of the Homeowner Affordability and Stability Plan
is to provide borrowers with a safe loan program with a fixed,
affordable payment. All loans refinanced under the plan will have
a 30 or 15 year term with a fixed interest rate. The rate will be
based on market rates in effect at the time of the refinance and
any associated points and fees quoted by the lender. Interest
rates may vary across lenders and over time as market rates
adjust. The refinanced loans will have no prepayment penalties or
balloon notes.
7. Will refinancing reduce the amount that I owe on my loan?
No. The objective of the Homeowner Affordability and Stability
Plan is to help borrowers refinance into safer, more affordable
fixed rate loans. Refinancing will not reduce the amount you owe
to the first mortgage holder or any other debt you owe. However,
by reducing the interest rate, refinancing should save you money
by reducing the amount of interest that you repay over the life
of the loan.
8. How do I know if my loan is owned or has been securitized by
Fannie Mae or Freddie Mac?
To determine if your loan is owned or has been securitized by
Fannie Mae or Freddie Mac and is eligible to be refinanced, you
should contact your mortgage lender after March 4, 2009.
9. When can I apply?
Mortgage lenders will begin accepting applications after the
details of the program are announced on March 4, 2009.
10. What should I do in the meantime?
You should gather the information that you will need to provide
to your lender after March 4, when the refinance program becomes
available. This includes:
• information about the gross monthly income of all borrowers,
including your most recent pay stubs if you receive them or
documentation of income you receive from other sources
• your most recent income tax return
• information about any second mortgage on the house
• payments on each of your credit cards if you are carrying
balances from month to month, and
• payments on other loans such as student loans and car loans.
Borrowers Who Are at Risk of Foreclosure Are Asking:
1. What help is available for borrowers who are at risk of
foreclosure either because they are behind on their mortgage or
are struggling to make the payments?
The Homeowner Affordability and Stability Plan offers help to
borrowers who are already behind on their mortgage payments or
who are struggling to keep their loans current. By providing
mortgage lenders with financial incentives to modify existing
first mortgages, the Treasury hopes to help as many as 3 to 4
million homeowners avoid foreclosure regardless of who owns or
services the mortgage.
2. Do I need to be behind on my mortgage payments to be eligible
for a modification?
No. Borrowers who are struggling to stay current on their
mortgage payments may be eligible if their income is not
sufficient to continue to make their mortgage payments and they
are at risk of imminent default. This may be due to several
factors, such as a loss of income, a significant increase in
expenses, or an interest rate that will reset to an unaffordable
level.
3. How do I know if I qualify for a payment reduction under the
Homeowner Affordability and Stability Plan?
In general, you may qualify for a mortgage modification if (a)
you occupy your house as your primary residence; (b) your monthly
mortgage payment is greater than 31% of your monthly gross
income; and (c) your loan is not large enough to exceed current
Fannie Mae and Freddie Mac loan limits. Final eligibility will be
determined by your mortgage lender based on your financial
situation and detailed guidelines that will be available on March
4, 2009.
4. I do not live in the house that secures the mortgage I'd like
to modify. Is this mortgage eligible for the Homeowner
Affordability and Stability Plan?
No. For example, if you own a house that you use as a vacation
home or that you rent out to tenants, the mortgage on that house
is not eligible. If you used to live in the home but you moved
out, the mortgage is not eligible. Only the mortgage on your
primary residence is eligible. The mortgage lender will check to
see if the dwelling is your primary residence.
5. I have a mortgage on a duplex. I live in one unit and rent the
other. Will I still be eligible?
Yes. Mortgages on 2, 3 and 4 unit properties are eligible as long
as you live in one unit as your primary residence.
6. I have two mortgages. Will the Homeowner Affordability and
Stability Plan reduce the payments on both?
Only the first mortgage is eligible for a modification.
7. I owe more than my house is worth. Will the Homeowner
Affordability and Stability Plan reduce what I owe?
The primary objective of the Homeowner Affordability and
Stability Plan is to help borrowers avoid foreclosure by
modifying troubled loans to achieve a payment the borrower can
afford. Lenders are likely to lower payments mainly by reducing
loan interest rates. However, the program offers incentives for
principal reductions and at your lender's discretion
modifications may include upfront reductions of loan principal.
8. I heard the government was providing a financial incentive to
borrowers. Is that true?
Yes. To encourage borrowers who work hard to retain
homeownership, the Homeowner Affordability and Stability Plan
provides incentive payments as a borrower makes timely payments
on the modified loan. The incentive will accrue on a monthly
basis and will be applied directly to reduce your mortgage debt.
Borrowers who pay on time for five years can have up to $5,000
applied to reduce their debt by the end of that period.
9. How much will a modification cost me?
There is no cost to borrowers for a modification under the
Homeowner Affordability and Stability Plan. If you wish to get
assistance from a HUD-approved housing counseling agency or are
referred to a counselor as a condition of the modification, you
will not be charged a fee. Borrowers should beware of any
organization that attempts to charge a fee for housing counseling
or modification of a delinquent loan, especially if they require
a fee in advance.
10. Is my lender required to modify my loan?
No. Mortgage lenders participate in the program on a voluntary
basis and loans are evaluated for modification on a case-by-case
basis. But the government is offering substantial incentives and
it is expected that most major lenders will participate.
11. I'm already working with my lender / housing counselor on a
loan workout. Can I still be considered for the Homeowner
Affordability and Stability Plan?
Ask your lender or counselor to be considered under the Homeowner
Affordability and Stability Plan.
12. How do I apply for a modification under the Homeowner
Affordability and Stability Plan?
You may not need to do anything at this time. Most mortgage
lenders will evaluate loans in their portfolio to identify
borrowers who may meet the eligibility criteria. After March 4
they will send letters to potentially eligible homeowners, a
process that may take several weeks. If you think you qualify for
a modification and do not receive a letter within several weeks,
contact your mortgage servicer or a HUD-approved housing
counselor. Please be aware that servicers and counseling agencies
are expected to receive an extraordinary number of calls about
this program.
13. What should I do in the meantime? You should gather the
information that you will need to provide to your lender on or
after March 4, when the modification program becomes available.
This includes:
• information about the monthly gross income of your household
including recent pay stubs if you receive them or documentation
of income you receive from other sources
• your most recent income tax return
• information about any second mortgage on the house
• payments on each of your credit cards if you are carrying
balances from month to month, and
• payments on other loans such as student loans and car loans.
14. My loan is scheduled for foreclosure soon. What should I do?
Contact your mortgage servicer or credit counselor. Many mortgage
lenders have expressed their intention to postpone foreclosure
sales on all mortgages that may qualify for the modification in
order to allow sufficient time to evaluate the borrower's
eligibility. We support this effort.
