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HUD Help for Homeowners - The Obama Plan
The President’s strategy for economic recovery is a stool with several legs, as he’s said, and one of them is solving the foreclosure crisis.
"We must stem the spread of foreclosures and falling home values for all Americans, and do everything we can to help responsible homeowners stay in their homes," he said yesterday as he signed the American Recovery and Reinvestment Act into law.
Though communities across the country have been affected by the crisis, Arizona has been hit particularly hard -- in 2008, only two states had more foreclosures.
And President Obama is there today, in Phoenix, to unveil his "Homeowner Affordability and Stability Plan," which will help bring relief to homeowners and bring some order to the housing market.
The President will talk more about his plan a little later today. In the meantime, we’re sure you have a lot of questions, like, Am I eligible for assistance? Might I be able to modify my loan? When do I apply? We've put together an example sheet that will show you what options might be available to you, depending on the circumstances of your mortgage, as well as answers to some common questions (below).
Questions and Answers for Borrowers about the
Homeowner Affordability and Stability Plan
Borrowers Who Are Current on Their Mortgage Are Asking:
* 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.
* 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.
* 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.
* 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.
* 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.
* 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.
* 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.
* 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.
* When can I apply?
Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009.
* 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:
o 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
o your most recent income tax return
o information about any second mortgage on the house
o payments on each of your credit cards if you are carrying balances from month to month, and
o payments on other loans such as student loans and car loans.
Borrowers Who Are at Risk of Foreclosure Are Asking:
* 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.
* 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.
* 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 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.
* 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.
* 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.
* 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.
* 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.
* 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.
* 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'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.
* 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.
* 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
o 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
o your most recent income tax return
o information about any second mortgage on the house
o payments on each of your credit cards if you are carrying balances from month to month, and
o payments on other loans such as student loans and car loans.
* 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.
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Online Resources
- Hanley Wood Business Media: Affordable Housing Finance magazine's Web site offers articles, tax credit and housing news, and other resources at www.housingfinance.com.
- Catalog of Federal Domestic Assistance: You can choose what criteria you want to use to sort federal programs and then link to them from www.cfda.gov/.
- Department of Housing and Urban Development (HUD): HUD administers a variety of multifamily housing loan and grant programs. Links to these programs are at www.hud.gov/groups/multifamily.cfm. For programs that support affordable housing through the Office of Community Planning and Development, go to www.hud.gov/offices/cpd/.
- Design Advisor: A resource toolkit from the Department of Housing and Urban Development focused on design and affordable housing. It includes information on green buidlling. Go to www.designadvisor.org.
- Enterprise Community Partners and Enterprise Community Investment: The Enterprise Resource Database organizes a wealth of information by topics. To access it, go to www.enterprisecommunity.org. Enterprise Community Investment offers Tax Credit information. To access visit: www.enterprisecommunity.com.
- Federal Housing Administration (FHA): Find information about FHA mortgage insurance programs at www.hud.gov/offices/hsg/mfh/progdesc/progdesc.cfm.
- Financial Services Committee of the U.S. House of Representatives: This committee oversees federal housing matters. It's Web site is at http://financialservices.house.gov and is operated by the majority members from the Republican Party. Also see the site for the Democratic and independent members of the Financial Services Committee at www.house.gov/banking_democrats/, where there is posted a lengthy chronological compliation of "HUD's Assault on Low-Income Housing for 2003-2004."
- GPO Access: This Government Printing Office site connects to federal codes and regulations, the Federal Register, federal legislation and judicial resources at www.gpoaccess.gov.
- Housing Assistance Council (HAC): HAC's slogan is "building rural communities," and its Web site provides good information about rural news and programs. Go to www.ruralhome.org.
- Housingonline: This site is sponsored by the National Housing & Rehabilitation Association, a national membership organization of participants in affordable multifamily housing. It is a wonderful source of information on an array of housing issues; some parts of the site are restricted to members. Go to www.housingonline.com.
- HUDCLIPS: This HUD "client information and policy system" site links to NOFAs, housing notices, forms, codes, handbooks and guides, fair market rents, public comment opportunities and more. It's not the most user-friendly site, but it does give access to some hard-to-find resources at www.hudclips.org/cgi/index_cliphome.cgi.
- Knowledgeplex: Sponsored by the Fannie Mae Foundation, this may be the single most useful Web site for people working in affordable housing. Not only does it provide a great deal of information on the site, but you can use links to access a variety of other housing organizations and resources. Go to www.knowledgeplex.org.
- Local Initiatives Support Corp. (LISC): LISC provides grants, loans and equity investments to community development corporations (CDCs) for neighborhood redevelopment, some of which is housing. Its online resource center includes a section on affordable housing at www.liscnet.org/ resources/affordable_housing.shtml.
- National Association of Home Builders (NAHB): NAHB is a powerful voice for the housing industry -- single family, multifamily, market-rate and affordable. Go to www.nahb.org/. National Council of State Housing Agencies (NCSHA): The NCSHA's recommended practices for tax credit compliance as well as information about public housing agency-administered programs and other resources are at www.ncsha.org.
- National Housing Conference (NHC): The NHC is a nonprofit with many corporate, nonprofit and governmental agency members. On the public part of its site, you'll find reports, studies, policy positions, advocacy resources and a specialization-organized list of members with links to their sites. Go to www.nhc.org.
- National Low Income Housing Coalition (NLIHC): The NLIHC is "dedicated solely to solving America's affordable housing crisis." To that end, its site offers reports, news, alerts, policy campaigns, and most helpful of all, a downloadable 198-page "Advocate's Guide to Housing and Community Development Policy." Go to www.nlihc.org.
- National Multi Housing Council (NMHC): The NMHC is made up of members involved in both market-rate and affordable multifamily housing. An enormous number of reports and studies is available on the site. Some items, such as its unique tracking of multifamily-threatening state legislation, are available to members only. Go to www.nmhc.org.
- Recapitalization Advisors, Inc.: Recap Advisors specializes in recapitalizing and preserving affordable housing. The gems on this site are the well-written and thorough articles about the complex issues involved in preservation. Go to www.recapadvisors.com.
- U.S. Census Bureau: A site rich in demographic, business and population data. Go to www.census.gov/.
- U.S. Department of Agriculture, Rural Development: Links to rural housing programs, regulations, news, forms and more are at www.rurdev.usda.gov.
- Web tools for real estate professionals: Sponsored by the Association of University Real Estate Officials, this site offers links to statistics, rates, organizations, maps, glossaries, providers of professional services and more at campus.umr.edu/adminfo/aureo.html.