Are Obama’s Federal Loan Modification and Refinance Programs Right For You?

President Obama has presented two new federal programs aimed at keeping homeowners in their homes.

The first program is the "Home Affordable Refinance Plan". This option is directed to homeowners who have thus far been able to make their mortgage payments, but who are unable to refinance their mortgages because their homes have become "upside-down". In other words, because of drastically falling home prices, they now owe more on their mortgages than the present value of their home. The "Home Affordable Refinance Plan" is a federally subsidized program to allow mortgage refinancing for 15 or 30 year terms. Refinancing is subject to current interest rates, and closing costs apply.It is specially focused toward homeowners facing higher mortgage payments due to adjustable rate mortgages, as this plan offers a fixed rate mortgage.

The following requirements will determine if you are eligible for this program:

You were not more than 30 days late in paying your mortgage payments for the past year.
The property to be refinanced must be your primary residence.
Only loans written under Freddie Mac or Fannie Mae are eligible.
The present balance of your mortgage cannot be more than 105% of the home’s present value.
Proof of earnings or other income must be provided to show that you are financially able to make the refinanced mortgage payments. You should keep in mind that if your present mortgage has a low-rate negative amortization option, or if your payments are applied to interest only and not to principal, your new payments under this plan could actually increase.
The mortgage must be a first mortgage, or trust deed. If there is a second lender in place, it must agree to subordinate its interests after the refinanced first mortgage.

The President’s second plan is the "Home Affordable Loan Modification Plan". This is available for all mortgages, not just those serviced by Freddie Mac or Fannie Mae. You must meet the following requirements to be eligible for this plan:

The mortgage you are seeking to modify must be on your primary residence.
The principal balance on your mortgage cannot exceed $727,750.00. (This figure is based on a single unit dwelling; there are higher limits for two to four unit dwellings).
Your mortgage must have been in place prior to January 1, 2009.
Your current mortgage payment, including taxes and insurance, must be more than 31% of your gross monthly income.
You must prove a financial hardship under your present mortgage.

You can qualify for this plan even if you are not delinquent on your payments, as long as you can show that circumstances are likely to cause delinquent payments in the future. You may find that your lender will be receptive to this plan, since lenders receive incentive payments from the Treasury Department for every qualified loan they approve. Your lender will provide an application which you must complete and submit, together with current financial documentation. Be sure your information is accurate, since this is what your lender will be basing its decision on. Possible modifications that your lender can make are reduced interest rates and extension of the mortgage term, both of which will serve to reduce your monthly payments.

Most homeowners with mortgages will find they qualify for at least one of these plans. Investigating them and speaking with your mortgage lender is the first step toward keeping your home!

For essential tips and facts about how to get approved for a Loan Modification, Visit our simple, no nonsense loan modification guide and resource: Mortgage Modification Loan.