Making Home Affordable Program - Refinance and Loan Modification Options for Homeowners

August 28th, 2009 categories: Central Connecticut News & Information, Home Owners

If you have a Fannie Mae, Freddie Mac or now, FHA-insured mortgage (HUD recently announced that FHA-insured mortgages will also qualify, effective August 15, 2009), you may have the option of refinancing or modifying your loan through the Making Home Affordable program.

Do I have a Fannie Mae, Freddie Mac or FHA mortgage?

Fannie Mae Loan Lookup

Freddie Mac Loan Lookup

I couldn’t find a loan lookup for FHA so I suggest you contact your loan servicer (the company you pay your mortgage to) or review your loan documents.

Note: If your loan is not backed by Fannie Mae, Freddie Mac or FHA, you still may be able to take part in the program. Participation in the Making Home Affordable is mandatory for these types of loans but optional for others.

What’s the Difference Between Refinance and Loan Modification?

The Home Affordable Refinance Program is designed to help home owners who are current on their mortgage (no late payments in last 12 months) and upside down in their mortgage - the amount owed on the first mortgage is up to 125% of the home’s current market value. There are other qualifications but essentially, the home owner must be able to afford the new payments and it must be a better overall deal for the home owner. It’s important to note that this program will NOT reduce the principal owed on the mortgage - it only reduces the interest rate.

The Home Affordable Modification Program is designed to help home owners who have fallen behind in their payments. The program is available only for primary residences and for the first mortgage originated before January 1, 2009. Home owners must show that they:

Have a monthly mortgage payment (including taxes, insurance, and home owners association dues) greater than 31 percent of their monthly gross (pre-tax) income; and

Have a mortgage payment that is not affordable due to a financial hardship that can be documented.

Participation in HAMP will reduce the interest rate to as low as 2% and may even extend the term of the mortgage. However, home owners may be required to agree to a principal forbearance, which defers (not eliminates) repayment of the principal owned to a later date.

Applying Immediately Stops a Short Sale and Foreclosure

Please note that if you are in the process of asking your lender to approve a short sale, contacting your lender to also qualify for a refinance or loan modification automatically stops the short sale approval. It will also stop a foreclosure until you complete the application process.

Who do you contact?

That’s the question of the hour. The web site offers several phone numbers - one to speak to a HUD counselor, one to call the HOPE NOW hotline and another to find your loan servicer’s contact information to contact them directly.

My advice is to determine which you are most likely to qualify for - the refinance or the modification based on the criteria above and the FAQ’s on the site. Then, gather all the information recommended on the HUD counselor page and call your loan servicer directly. Ask them to either apply for a refinance or modification under the Making Home Affordable program.

You may not qualify for either program so your option may still be to do a short sale.