Refinance or Modify with Obamas Making Home Affordable Program

by admin ~ June 4th, 2009.

Zions Bank and Keller Williams Real Estate are sponsoring an information session on June 9th to inform people about refinancing and loan modification options with President Barack Obama’s Making Home Affordable program.


According to Mike Barnes, most home owners will qualify for some part of the foreclosure prevention program. He calls it exciting and beneficial. And it’s free.  “In all my experience I’ve never seen anything like this,” he said. Barnes believes many people can benefit from the program because it has two parts. The first is the most accessible one: FHA refinancing.   In order to alleviate the pain of home owners, the federal government has pushed mortgage interest rates down to historically low rates. Unfortunately, many owners who pay on time, live within their means and have done nothing wrong don’t qualify to refinance because the value of their home has dropped in the recession.


If the mortgage loan is 80 to 105% of the value of the home, the government will assist in the refinancing to current low rates, Barnes explained. The second part of the program is harder to qualify for, but will save many people’s homes from foreclosure, he said. It is loan modification. The government will take drastic measures to help qualified participants stay in their home.  There are five criteria: if the home is the primary residence, if the mortgage is for less than $729,000 (not a jumbo loan), was obtained before Jan. 1, 2009, if the owner has experienced financial, setbacks and if the mortgage payment exceeds 31% of their gross income.


The people targeted for this program are those who were victims of loan officers setting up monthly payments way beyond a person’s means and people who obtained a reasonable mortgage but have reduced income because of the recession, Barnes explained. The goal of the mortgage loan modification plan is to reduce a mortgage payment to 31 % of the participant’s gross income and has set strategies for doing so.  “The administration wants it standardized,” he said. “They’ve dictated these terms.”  The first step would be to lower interest rates incrementally, to as low as 2%, until the monthly payment doesn’t exceed 31%. If that doesn’t work, the life of the loan could be extended up to 40 years. If that still doesn’t do it, up to $50,000 can be placed in interest-free forbearance, or a delayed balloon payment. That lower mortgage rate will last for up to five years, after which time it will go up to a regular market rate, but then freezes at that for the life of the loan, he said.  “It costs homeowners nothing to do this,” Barnes said. “It’s against the law to charge for this service.”


Learn more about the federal Making Home Affordable program.  Learn how to take advantage of new federal programs to lower interest rates or modify mortgages with a loan modification.

Article was written by Andrew Kirk.


Category: Featured Articles, Foreclosure news, Mortgage News, foreclosure prevention | Tags: , , ,

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