New Obama Bailout, Modifications and SHORT SALES... How will this affect us?
There is a lot of buzz going on today with this Bailout and what is going to do for everyone. These questions and answers were posted at a White House Forum to inform the public of Obama’s new plan.
Lets get Started:- 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.
There is not many Homeowners that are as low 105% . .its more like 150%!
The cold hard truth is that most homeowners are tens of thousands of dollars upside down on property value.
- 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.
This wasn’t a surprise. . but it gives you notice that if you are thinking of moving out of your home before you find an option to settle your mortgage. .you will not be eligible if you are already living somewhere else.
This is also a big concern because a majority of Americans that are under water right now are Investors. Meaning they own more that a few properties which are all going to need a loan modification.
- How do I know if I am eligible?
Complete eligibility details have been announced on March 4th when the program started. The criteria for eligibility will include having enough provable income to make the new set mortgage payments along with a decent mortgage payment history. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.
- Will refinancing lower my payments?
The objective of the Homeowner Affordability and Stability Plan is to provide credit worthy 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.
EVERYONE needs to call their bank to see if they can get into a better loan! Even if you loan is not due to adjust for another year, I still recommend you contact now to get into a new today! You don't wait to wait until your loan adjust before you start working on it, that's how people get into trouble!
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.
No Way! Other than doing a short sale there is never a way to reduce principle balance!
- 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.
If you see your financial situation changing in the future, Modify Now or Short Sale Now!!
- 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.
- 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. One a short sale both banks will negotiate both down.
If you are very upside down on your property and don't really see yourself being able to afford the payments in the future, do a short sale now!
I recently read somewhere that over 50% of loan mods go back into default!
- 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.
There is a lot of nonprofit loan mod companies out there. I suggest you hunt one down and go with them!
- 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.
I think this is going to open a lot more doors for people that where previously out of luck.
- 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.
Shot Sale Time! If you owe a lot more than what your house is currently worth and you don't see your equity coming back up for 10 years.. . you should start thinking about doing a short sale as long as you can't make your payments anymore.
I think that Shorts Sales are great option for a lot of people!! The best part is that it cost the Homeowners nothing!
Lenders will not negotiate on short sale that is being purchased by one of your relatives.
A Short Sale helps every party involved! The bank will always net more with a short sale than with a foreclosure.
The Realtor or Mitigation Company negotiating your short sale should have sufficient knowledge with short sales. Sometimes get get a little tough to do and that is why you want to make sure you have a Pro!
No matter what the size of your loan the chances are a short sale will work for you!
Sam Khorramian
Success Expert
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To legally wipe out debt is to take a new legislative measure.The best thing is, your mortgage lender or your legal housing/credit counselor can help you decide which option is best for you.And during this recession, we are in need of new ways how to help our country from this crisis, saving money is the right thing to do starting right at our home.
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