Home Loan Refinancing And Modification Stimulus Details

As part of Obama stimulus packages introduced in March 2009, the four biggest mortgage servicers in America agreed to participate in loan modification programs for distressed homeowners.

These companies, which hold two-thirds of American mortgages, are:
•Wells Fargo
•Bank of America (which took over Countrywide)
•JP Morgan Chase (which took over Washington Mutual)
•Citigroup

Mortgage Stimulus Details

The mortgage stimulus package is expected to help facilitate 4-5 million refinancings and 3-4 million loan modifications. This mortgage stimulus money is aimed at homeowners who are stuck with high interest rate loans, adjustable rate loans (ARMs), and interest only loans.

Under normal circumstances, homeowners with less than 20% equity in their homes wouldn’t be able to qualify for refinancing. Because the price of homes in the twenty major cities in America dropped an average of 20% between March 2008 and March 2009, this would include millions of homeowners.

Details of the new mortgage stimulus packages:

•lowering interest rates (temporarily) to as low as 4%
•extending loan terms to up to 40 years
•forgiving principal on the loan

Borrowers fall into two categories: credit-worthy and at-risk.

Credit-Worthy Homeowners Mortgage Stimulus

If you’re not in trouble yet, but you’re on the brink of it, you might be able to refinance your property or modify your original home loan. To qualify for a refinancing loan or loan modification, the following criteria must be met:
•have to be current on payments
•property must be owner-occupied
•need to prove financial distress
•must owe less than $729,750
•first mortgage on the property can’t exceed 105% of home’s current value
•new mortgage payment can’t exceed 31% of household’s gross income
•this program will be available from March 2009 through June 2010.

At-Risk Homeowners  Mortgage Stimulus

If you’re late on your home payments, you might qualify for a refinancing or home loan modification. To qualify, the following criteria must be met:
•mortgage must have been in place before January 1, 2009
•can be delinquent on your payments, but must have adequate monthly income to cover modified mortgage payment
•new mortgage payment can’t exceed 31% of household’s gross income
•property must be owner-occupied
•need to prove financial distress
•this program will be in place between March 2009 and December 2012
•after 5 years, the interest rate on the new loan could rise, but never beyond the market rate at the time
•if you participate in this program, you may be required to enter a debt counseling program

Who’s Not Eligible For Mortgage Stimulus
People who aren’t eligible for either of the mortgage stimulus programs described above include:
•investors
•second home owners
•homeowners with current mortgages of $729,750 or more

For more information on these mortgage stimulus options, contact:
•your lender
•mortgage broker
•real estate professional
•financial advisor
•accountant

Click here for more information on first time home buyers credits.