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The Homeowner Affordability And Stability Plan

Home values have drastically decreased and many people are finding it hard to refinance mortgage loans at lower rates. Many people have lost their jobs and missed mortgage payments. Others may be living with bad credit and are facing foreclosure. The Homeowner Affordability and Stability Plan, signed into law in February 2009, should allow many more people to get out of debt and take control of their mortgage so they can avoid foreclosure.

The Making Home Affordable Program offers two different potential solutions for borrowers:

  1. Refinancing mortgage loans, through the Home Affordable Refinance Program (HARP)
  2. Modifying mortgage loans, through the Home Affordable Modification Program (HAMP).

Home Affordable - Refinance

Eligible borrowers who are current on their mortgages but have been unable to take advantage of today's lower interest rates because their homes have decreased in value, may now have the opportunity to refinance. Through a refinance under HARP, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they own or that they guaranteed in mortgage backed securities.

Under the 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.

You may be eligible if:

  • The loan on your property is owned or guaranteed by Fannie Mae or Freddie Mac
  • At the time you apply, you are current on your mortgage payments ("current" generally means that you have not been more than 30 days late on your mortgage payment in the last 12 months, or, if you have had the loan for less than 12 months, you have never missed a payment);
  • The amount you owe on your first lien mortgage does not exceed 125 percent of the current market value of your property;
  • You have a reasonable ability to pay the new mortgage payments; and
  • The refinance improves the long term affordability or stability of your loan.

To apply for a refinance under HARP you should call your mortgage lender and ask for a Home Affordable Refinance application. The number is on your monthly mortgage bill or coupon book. Alternately, you may apply through a lender approved to do business with Fannie Mae or Freddie Mac. Nearly all major banks and mortgage brokers have this approval.

Paperwork Needed

  • Income documentation - pay stubs or other proof of income.
  • Most recent tax return.
  • Payment amounts for any outstanding credit card balances.
  • Payment amounts on any other loans you have such as car loans, student loans, personal loans.
  • If there is a second mortgage then you need to provide information on that.

 

Home Affordable Modification

The Program helps borrowers who are struggling to keep their loans current or who are already behind on their mortgage payments. By providing mortgage loan servicers with financial incentives to modify existing first lien mortgages, the Treasury hopes to help homeowners avoid foreclosure regardless of who owns or guarantees the mortgage.

To apply for a modification under HAMP, you must:

  • Be the owner-occupant of a one to four unit home;
  • Have an unpaid principal balance that is equal to or less than:
    1 Unit: $729,750
    2 Units: $934,200
    3 Units: $1,129,250
    4 Units: $1,403,400
  • Have a first lien mortgage that was originated on or before January 1, 2009;
  • Have a monthly mortgage payment (including taxes, insurance, and home owners association dues) greater than 31 percent of your monthly gross (pre-tax) income; and
  • Have a mortgage payment that is not affordable due to a financial hardship that can be documented.

Participation is mandatory for servicers of loans owned or guaranteed by Fannie Mae or Freddie Mac (Government Sponsored Enterprises or GSEs). Participation in HAMP is voluntary for servicers of non-GSE loans. However, substantial incentives are available to servicers, investors and borrowers who complete modifications under HAMP, and most major servicers already have committed to the Program. A current list of participating servicers is available at www.MakingHomeAffordable.gov.

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