More Details to the Goverments Refi Plan

As promised, this morning some of the details have been announced from the Treasury regarding the plans to help responsible home owners via refinancing or loan modifications in the "Making Home Affordable Program".  From this mornings Press Release:

"Today, we are providing servicers with the details they need to begin helping eligible borrowers," said Treasury Secretary Tim Geithner. 

The Making Home Affordable program addresses refinancing existing mortgages and loan modifications.  From the summary of guidelines:

The Home Affordable Refinance program will be available to 4 to 5 million homeowners who have a solid payment history on an existing mortgage owned by Fannie Mae or Freddie Mac. Normally, these borrowers would be unable to refinance because their homes have lost value, pushing their current loan-to-value ratios above 80%. Under the Home Affordable Refinance program, many of them will now be eligible to refinance their loan to take advantage of today’s lower mortgage rates or to refinance an adjustable-rate mortgage into a more stable mortgage, such as a 30-year fixed rate loan.

GSE lenders and servicers already have much of the borrower’s information on file, so documentation requirements are not likely to be burdensome. In addition, in some cases an appraisal will not be necessary. This flexibility will make the refinance quicker and less costly for both borrowers and lenders. The Home Affordable Refinance program ends in June 2010.

Update 11:00 am: this program should be available in April.  Fannie and Freddie have to implement the new guidelines into their system before lenders have ability to provide refinances over 80% loan to value without private mortgage insurance.  More information will follow as it becomes available.  Get your loan application in now!

The Home Affordable Modification program does not involve a refinance (which is a new mortgage replacing the existing mortgage).  With a loan modification, the terms of the existing mortgage are modified.  You can read the borrower qualifications by clicking here.   This applies to borrowers who are dealing with "financial hardship" and this is a "full document" transaction including providing income documentation and verification that the home is owner occupied.  Families with high debt levels may be required to complete financal counceling through a HUD approved counselor. 

This program factors in the High Cost areas, like Seattle, Bellevue, Tacoma and Everett.  The newly revised High Balance loan limit for our area is $567,500.  Which it looks like as of today, may actually be available.

Treasury announced today that the Making Home Affordable program will also include additional incentives for efforts made to extinguish second liens on loans modified under this program.

In an effort to keep mortgage rates low, the Treasury is also stepping up its Preferred Stock Purchase Agreements to $200 billion each (to Fannie and Freddie) from $100 billion.  These funds are coming from the Housing and Economic Recovery Act and are not a part of TARP.  

If the Government really wants to reduce mortgage rates, they should look at suspending some of Fannie Mae and Freddie Macs price hits (LLPA) which are not working "in concert" with the efforts of the Treasury. 

There is certain a lot of "efforts" being made by our Government.  The next step is to have the Fannie and Freddie implement these plans AND THEN it trickles down to the banks.  We'll see how quickly this process will be.


  1. MP Reader says

    Rhonda – What do you think this plan does for someone in my position: (1) Full-time student and very part time employment when my wife and I got our mortgage 23 months ago (still am a student and work about 15 hours per week now) so we had to do a stated income Fannie loan, which put us into an (2) interest only loan with a (3) 3-year prepayment penalty (costing 6 months’ interest)? I know, long and confusing question for a program that was just introduced this morning. As I read CNN’s take and your take on the program, it would seem we qualify but to what extent? Would/Should/Could our prepayment penalty be waived? If we sustain ourselves through student loans, how does the government those funds (income?)? What about our LTV ratio considering loans are our major source of income? Any idea on when you or other brokers will have more info to actually start implementing the program? Sorry for the rambling, but thanks in advance!

  2. MP Reader, everything that I am seeing indicates “full documentation”. Student loans have never qualified as income in a full doc scenario.

    I recommend that you contact who you’re making your mortgage payments to…see if they will do a loan modification and if they will waive the prepayment penalty.

    If they do a loan mod, the prepay penalty is really a moot point and probably a fair trade.

    Prepayment penalties have not been addressed from what I can see.

    President Obama’s plan will convert mortgages to amortized. It’s quite possible that your interest only payment is lower than current amortized. The hard choice will be (if you have a choice) where rates will be in the future when your interest only period is over.

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