The number of permanent modifications that have been approved by the servicers but are still waiting to be accepted by the borrowers has also risen to 91,800 from the previously reported figure of 76,000. The number of homeowners that have received offers for trial modifications is still around the 1.3 million mark which is around 34 to 45% of the final goal which needs to be reached by the end of 2012. A further 72,000 trial modifications commenced in February.

The cancellation figures are pretty low, for modifications converted to a permanent status only 0.9% have been canceled and for all modifications started the number is 8.2%.

A benefit of completing 1 years worth of on time payments is eligibility to earn up to a further $1000 which could be applied to the outstanding mortgage balance, which would further reduce the capital amount owed.

Mortgage Refinancing

Mortgage refinancing through the Home Affordable Refinancing Program is due to close in 3 months in June of 2010. It is reported that over 4 million borrowers with GSE mortgages have been allowed to refinance with average savings of $150 per month which represents savings of more than $6.8 billion in the first year.

You can download a .pdf of the full report here Make Home Affordable

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If you are serious about avoiding foreclosure the worst thing you can do is ignore the letters and the problem. The more payments you miss the more difficult it will become to resolve the problem and loosing your house will become more likely.

So make sure you contact your home lone mortgage lender as soon as you become aware that you have a problem. There will be options available to you to help you through your financial difficulties and mortgage lenders really do not want your house, they would prefer that any financial problems are resolved. Some of the options are home loan mortgage refinancing and loan modification but there may also be alternative options.

Open and read all correspondence from your lender, apart from anything else the information provided may include suggestions for avoiding foreclosure. You are also likely to have any proposed legal actions against you outlined and you need to be aware of these, not opening your mail cannot be used in your defense or as an excuse if you end up in court.

Take the time to read and understand your loan documents so you know what your lenders procedures are if you do not meet your repayments. Also be aware that foreclosure laws and time frames are different in each state so find out what the rules are in your state, you can inquire at the State Government Housing Office.

If you need further help and advice you can contact a HUD approved housing counselor, this service is usually free and you can Find a Counselor near you using this link.

One thing you should know for sure is that there are differences between the mortgage refinancing program from Obama’s initiative “Making Home Affordable’  and an earlier initiative that came from George Bush  the ‘Hope for Homeowners’ program.

Hope for Homeowners Program

This program is administered by the Federal Housing Administration and its key features are as follows:

• Mortgage is fixed rate and can be taken over a period of 40 years (recently extended from 30 years)
• Refinancing provides the possibility of reducing monthly repayments
• The agreement is entered into voluntarily by both lender and borrower

To be eligible for this loan certain criteria needs to be met:

• The house must be your primary place of residence and you should have no interest in other residential properties
• Your mortgage must have been in place before January 1st,2008 and you must have made at least 6 monthly payments
• You must be is a situation where you cannot make your current mortgage payments without assistance
• You cannot have been convicted of a fraudulent offense in the last 10 years, obtained a mortgage off the back of false claims or deliberately failed to make a payment on a debt
• You must maintain a full record and documented evidence of income and employment
• You have to be prepared to share the positive equity in your home, both current value and any future increases
• Your total mortgage payments, including capital repayments, interest and insurance will have been more than 31 % of your gross income from March 2008.

Constraints and payments:

• the loan to value ratio of your house can be no more than 96.5% (recently increased from 90%) on the understanding that your total mortage payments can be no more than 31% of your gross income and your total debt repayments can be no more than 43% of gross salary for equivalent time periods (e.g. monthly). This can be increased to 38% and 50% repsectively if the loan to value ratio is 90% or less.
• the interest rate will be based on current market rates and agreed between you and the lender
• there will be an initial mortgage insurance payment of 3% after which you will pay a 1.5% mortgage insurance premium as part of your monthly payments.
• You will also be required to pay closing costs on the loan, for an idea of what these costs will be you will be provided with a best estimate at the time of taking out the new loan.
• if you have a second mortgage and want to take out another mortgage under this program you will have to wait 5 years from the start of the first loan.
• This program ends on September 30th, 2011

These are the key features of this program, to find out further details and information you can talk to a FHA approved lender or a housing counselor.

Making Home Affordable

This program was introduced by Obama to try and get the American housing market back on line and the key features are as follows:

• there are 2 aspect to this initiative, mortgage refinancing and loan modification, it is the mortgage refinancing aspect that is comparable to the ‘HOPE for homeowners’ program which is why this is the aspect we will be looking at here. Refer to my previous post for ‘loan modification.
• Anyone who has an existing mortgage that is owned or guaranteed by Freddie Mac or Fannie Mae can be considered for mortgage refinancing  providing they meet the additional qualifying criteria.

Qualifying criteria for the ‘Making Home Affordable’ mortgage refinancing option:

• you have to be the owner of a 1 to 4 unit home
• your mortgage payments must be up to date (no more than 30 days late on a payment in the previous 12 months)
• your loan amount cannot exceed more than 125% of your house valuation (recently increased from 105%)
• you must be in a position where you can afford to make the repayments on the new loan albeit they should be lower than your current loan (this refers to a change in circumstance since you took out your current loan e.g. you may have lost your job and consequently income)
• refinancing improves the affordability or long term stability of your loan

Constraints and payments:

• Points and fees will be advised by the lender in accordance with their terms
• Interest will be set at market rates around the time of the loan.
• Anyone who is considered to be delinquent or has exceeded a  30 day late payment period more than once in the last 12 months will not be eligible
• Mortgage insurance is required only if your current loan includes private insurance
• The monthly payments by default will include an allowance to cover taxes and insurance.
• This program ends in June 2010

You are entitled to free advice from your lender or a HUD approved housing counselor for the ‘Making Home Affordable’ program never pay anyone for this service.

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The Obama new stimulus package amounts to a massive $1 trillion bale out package that offers new loan options, grants and tax credits. So for home owners that are struggling, there is relief in site and it is possible to take a home loan mortgage refinance option to get lower rates of interest or longer repayment periods.

Obama has offered a $1000 incentive to encourage home owners to opt for mortgage refinance or loan modification instead of going for a short sale or foreclosure option.

There are rules that apply to these mortgage refinance deals : -

Loans guaranteed or issued by the Federal National Mortgage Association, (Fannie Mae) or the Federal Home Mortgage Corporation, (Freddie Mac), which are institutions that have been in existence since 1968 as government sponsored enterprises (GSEs), are all eligible for mortgage refinancing providing that :

• You are the owner of a 1 to 4 unit home
• The existing mortgage value is no greater than 105% of the valuation of your home. This has now increased to 125% since it became clear that it was locking many people out of eligibility for the program, see home loan mortgage refinance update.
• You are up to date with your payments and have not fallen behind.
• Your circumstances have not changed and you are able to afford the new lower repayments, e.g. you haven’t lost your job and consequently your income.

Additional information

The mortgage refinancing option is only available until June 2010
The applicant can ask for a fixed rate of interest rather than a variable rate (adjustable rate mortgage)
Longer term loans are being made available so that you can pay back over longer periods e.g. 30 years.
If your mortgage isn’t guaranteed or issued by the 2 primary institutions (Fannie Mae or Freddie Mac) then you are not eligible

Also on a cautionary note home loan mortgage refinancing may require some fees to be paid, you may also have to go through new credit checks and they typically take longer than the loan modification option. The best way forward for finding out if this it the choice for you is to approach your existing lender and see if you qualify and what the full conditions are so that you can make an informed decision.

For the United States this is one prong of a two pronged approach to to balancing out the financial chaos that has existed for homeowners since the near collapse of the banking system both in the USA and worldwide. I will be discussing  the 2nd ‘loan modification’ prong in a separate post.