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Make Homes Affordable Program Alternatives to Loan Modification Through Making Home Affordable

17 December, 2014



Using money from the “Troubled Asset Recovery Program” (TARP) legislation passed last year to bail out the banks, President Obama has enacted a plan through the Treasury Department to help “at-risk” homeowners by giving incentives that will enable you to refinance directly with your current lender at today’s low interest rates and help keep you in your home. The eventual goal of this “Homeowner Stabilization Plan” is designed to rewrite the terms of approximately 9 -10 million mortgages to provide assistance for “at-risk” homeowners who might otherwise lose their home without new mortgage terms. Over $100 billion dollars have been allocated to support the implementation of this plan. Homeowners with eligible mortgages held by Fannie or Freddie will be eligible for refinancing. Homeowners with private mortgages may be eligible for subsidized loan modifications. The plan has now been initiated as of March 4, 2009, but only accepts borrowers who entered into their loans prior to January 1, 2009. The last date that the plan is currently slated to accept new participants is December 31, 2012.

The Make homes affordable program is designed for mortgages owned by Freddie Mac and Fannie Mae in which the homeowner can afford their monthly payments but is unable to refinance because they currently owe more than their home is worth. Under this program Fannie Mae and Freddie Mac will allow them to refinance up to 105% of the value of their home at today’s market interest rate. In order to qualify for this program you must have a satisfactory credit rating. Regarding the HAMP program (Home Affordability Modification Program) – this program is designed to help people who are in foreclosure or going to be in foreclosure to keep their homes. This program is designed to assist people who have suffered some sort of financial hardship due to a reduction in income such as the loss of a job for your spouse or experienced an increase in the mortgage payment as in the case of an adjustable rate mortgage that adjusted up. The household must still have income however credit is not a factor.

Under the guidelines of the HAMP program your interest rate can be lowered to as low as 2% for up to 5 years, the bank may also extend the repayment term up to 40 years, and a portion of the principle balance of your loan may be placed on forbearance – A big word meaning its still hanging out there but you don’t have to pay interest on it for a certain period of time. If you sell your home – you’ll still have to pay that money back. All of these factors are designed to get your mortgage payment down to 32% of your gross household income.

It is also important to note that many other loss mitigation services are available to those who do not qualify for the Make homes affordable program. A loan modification may still be achieved through many different means, including a net cash-flow / hardship based approach, through legal pressure by finding significant violations of RESPA, TILA, or applicable State and Federal Laws and Statutes, or through the general guidelines published under FDIC’s “Mod-in-a-Box”. Additionally, a short-sale may be the best option for a homeowner that simply wants to leave the property free and clear, provided the lender is willing to allow the payoff of the mortgage to be “short” in return for being able to avoid foreclosure and the necessary legal and other applicable fees.

Authority – The Secretary is authorized to establish the TARP to purchase and to make and fund commitments to purchase, troubled assets from any financial institution, on such terms and conditions as are determined by the Secretary. TARP 101 (a) (1) Thus, TARP gave the Secretary of the Treasury the authority to determine what “troubled assets” to purchase and under what guidelines. It is under this framework that the MSA was developed and announced by President Obama in February, 2009, and now implemented. Goals and Guidelines: The following is a highlight of what information is now available to consumers. The MSA is aimed at “at risk” mortgages. The primary goal is to ” provide access to low-cost refinancing for responsible homeowners suffering from falling home prices.” Department of the Treasury. One of the reasons for implementation of the MSA is that mortgage rates are currently at historically low levels, providing homeowners with the opportunity to reduce their monthly payments by refinancing. But under current rules, most families who owe more than 80 percent of the value of their homes have a difficult time securing refinancing. (For example, if a borrower’s home was worth $200,000, he or she would have limited refinancing options if he or she owed more than $160,000.) Thus, millions of responsible homeowners who put money down and made their mortgage payments on time have – through no fault of their own – seen the value of their homes drop low enough to make them unable to access these lower rates. The MSA is designed to help people in such situations.

Learn more about Obama Mortgage Relief Plan Qualifications.



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