More Questions & Answers About The Homeowner Affordability and Stability Plan

More question have come regarding the Homeowner Affordability and Stability Plan. Here is what people are asking:

REFINANCING

What are the requirements in the refinance program?

- The home may be owner occupied, non owner-occupied or a second home.

- Borrowers current loan must be with Fannie Mae or Freddie Mac.

- Borrowers must be current with their loan and have not been more than 30 days late once on their mortgage payment in the last 12 months for Fannie Mae refinances. Freddie Mac will not allow any late payments within the last 12 months.

- The home's value must be near the current mortgage balance (between 80-105% is permitted).

- Mortgage insurance (MI) is not required if the existing mortgage does not require MI. Otherwise, MI coverage on the new loan must be the same as on the original mortgage. No minimum credit score required.

- There is no maximum TLTV (total Loan to value) ratio, however Relief Refinance Mortgages cannot be used to pay off or reduce subordinate liens.

Does the refinance require a borrower benefit?

These new refinance options are intended to assist borrowers by providing a benefit to ensure long term homeownership sustainability. Borrowers need to be receiving a benefit in the form of either:

- a reduced monthly mortgage principal and interest payment; or

- a more stable mortgage, for example, movement from an ARM to a fixed rate mortgage.

What happens to second liens and does the borrower have the ability to get a 2nd mortgage?

- New subordinate financing is not permitted.

- All existing subordinate financing must be re subordinated to maintain first lien priority of the new refinanced mortgage loan.

MODIFICATIONS

How does the loan modification plan work?

The loan modification initiative is intended to reduce mortgage payments to a target 31% front end debt to income ("DTI") ration to make the payments affordable and sustainable. This would be accomplished first by reducing interest rates down to a floor of 2%. If the rate reduction is not sufficient, then the term or maturity date of the loan would be extended up to 40 years. If that still is not sufficient to reach the target DTI., then they would forbear principal. Lenders and servicers also have other options, such as HOPE for Homeowners, forgiving principal and other loss mitigation programs for borrowers that are not eligible for this program.

What are eligibility and verification requirements?

-Loans originated on or before January 1, 2009.

- First lien loans on owner occupied properties with unpaid principal balance up to $729,750. Higher limits allowed for owner occupied properties with 2-4 units.

- All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, most recent tax return, and must sign an affidavit of financial hardship.

Property owner occupancy status will be verified through credit reports, tax returns and utility bills or other documentation; no investor owned vacant, or condemned properties.

Hope this helps. Keep the questions coming.