Burt M. Polson | Napa Valley and Vallejo's Commercial Real Estate Broker

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Napa Valley & Vallejo, California

Understanding the Housing Stimulus Package

How to Help Homeowner's Understand Obama's Foreclosure Plan March 4, 2009

Courtesy of: Jake Baker, Pacific Mortgage Consultants, (415) 847-2670

Making Home Affordable Programs

Key Refinancing Qualification Guidelines:

  • This program is designed to enable the refinancing of homes that have lost value into today’s lower rates until June 2010
  • Across the board $729,750 1st mortgage maximum!
    • It appears that restrictions by county were eliminated!
    • Homeowner must be able to qualify for and afford the new, lower payment
      • Primary residence will be verified by tax return, credit report, & utility bills
      • Income verified by one year tax returns & recent pay stubs
      • No more that 30-days late on your mortgage payment in the last 12 months
        • In other words, no more than one 30-day late in the past year
        • Current 1st must be held or controlled by
          • Fannie Mae: 1-800-7FANNIE (8am to 8pm EST)
          • Freddie Mac: 1-800-FREDDIE (8am to 8pm EST)
          • Some details are not as clearly stated as loan mod details...
            • For example, 105% LTV for the 1st mortgage was stated in last week's press release
              • In other words, if your mortgage happens to be at the new limit - $729,750; but your home value has fallen to $766,237 -- congratulations, you just made it!
              • However, I cannot find that same LTV cap in the official release today
              • For now, we can assume a 105% LTV is still in effect
              • Nor is it perfectly clear how 2nd mortgage lenders will be dealt with
                • 2nd mortgage payments will still be in the back end debt ratios
                • Will they voluntarily subordinate to the new 1st?
                • There is a cash incentive to cooperate in the loan modification program that will be paid by the FED to the 2nd lien holders; perhaps this will be allowed in the refinance program, too

Key Loan Modification Details:

  • $75 billion to the 3-4 million who are now "Underwater" due to legitimate hardships goes to 2012
    • How the FED will monitor on-going hardships still TBD
    • Only loans currently owned or controlled by Fannie Mae and Freddie Mac
    • Homeowners can go direct to their Lender -- no 3rd parties needed
    • Maximum $729,750 home value, and no LTV requirements
    • Homeowner DOES NOT have to be delinquent in order to qualify
    • Required Docs: most recent tax return; two pay stubs; hardship letter
    • Loans are 5-year fixed going for as low as 2%
    • Payments will be lowered to 31% of income
      • Lenders must drop payment to 38%"
      • FED will share the further drop down to 31%
        • Example: 1st Mortgage = $500k @6.25% = $3,078/month
        • Income = $4,000 per month X 31% = new payment of $1,240!
        • Cash incentives will be paid to lenders to cooperate
        • Cash incentives will be paid to borrowers, too!
          • As long as the borrower stays current on his or her payments, he or she can get up to $1,000 each year for five years paid towards loan principle

An ACRES Real Estate Services, Inc. Company