February 18th, 2009
10:16 AM ET

Q&A on the foreclosure plan, and what it means for you

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Questions and Answers for Borrowers about the Homeowner Affordability and Stability Plan from the U.S. Department of Housing and Urban Development.

Borrowers Who Are Current on Their Mortgage Are Asking:

1. What help is available for borrowers who stay current on their mortgage payments but have seen their homes decrease in value?

Under the Homeowner Affordability and Stability Plan, eligible borrowers who stay current on their mortgages but have been unable to refinance to lower their interest rates because their homes have decreased in value, may now have the opportunity to refinance into a 30 or 15 year, fixed rate loan. Through the program, Fannie Mae and Freddie Mac will allow the refinancing of mortgage loans that they hold in their portfolios or that they placed in mortgage backed securities.

2. I owe more than my property is worth, do I still qualify to refinance under the Homeowner Affordability and Stability Plan?

Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.

3. How do I know if I am eligible?

Complete eligibility details will be announced on March 4th when the program starts. The criteria for eligibility will include having sufficient income to make the new payment and an acceptable mortgage payment history. The program is limited to loans held or securitized by Fannie Mae or Freddie Mac.

4. I have both a first and a second mortgage. Do I still qualify to refinance under the Homeowner Affordability and Stability Plan?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible to refinance under the Homeowner Affordability and Stability Plan. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage to remain in a second position, and on your ability to meet the new payment terms on the first mortgage.

5. Will refinancing lower my payments?

The objective of the Homeowner Affordability and Stability Plan is to provide creditworthy borrowers who have shown a commitment to paying their mortgage with affordable payments that are sustainable for the life of the loan. Borrowers whose mortgage interest rates are much higher than the current market rate should see an immediate reduction in their payments. Borrowers who are paying interest only, or who have a low introductory rate that will increase in the future, may not see their current payment go down if they refinance to a fixed rate. These borrowers, however, could save a great deal over the life of the loan. When you submit a loan application, your lender will give you a "Good Faith Estimate" that includes your new interest rate, mortgage payment and the amount that you will pay over the life of the loan. Compare this to your current loan terms. If it is not an improvement, a refinancing may not be right for you.

6. What are the interest rate and other terms of this refinance offer?

The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the refinance and any associated points and fees quoted by the lender. Interest rates may vary across lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.

7. Will refinancing reduce the amount that I owe on my loan?

No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.

8. How do I know if my loan is owned or has been securitized by Fannie Mae or Freddie Mac?

To determine if your loan is owned or has been securitized by Fannie Mae or Freddie Mac and is eligible to be refinanced, you should contact your mortgage lender after March 4, 2009.

9. When can I apply?

Mortgage lenders will begin accepting applications after the details of the program are announced on March 4, 2009.

10. What should I do in the meantime?

You should gather the information that you will need to provide to your lender after March 4, when the refinance program becomes available. This includes:

· information about the gross monthly income of all borrowers, including your most recent pay stubs if you receive them or documentation of income you receive from other sources

· your most recent income tax return

· information about any second mortgage on the house

· payments on each of your credit cards if you are carrying balances from month to month, and

· payments on other loans such as student loans and car loans.

Borrowers Who Are at Risk of Foreclosure Are Asking:

1. What help is available for borrowers who are at risk of foreclosure either because they are behind on their mortgage or are struggling to make the payments?

The Homeowner Affordability and Stability Plan offers help to borrowers who are already behind on their mortgage payments or who are struggling to keep their loans current. By providing mortgage lenders with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.

2. Do I need to be behind on my mortgage payments to be eligible for a modification?

No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.

3. How do I know if I qualify for a payment reduction under the Homeowner Affordability and Stability Plan?

In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final eligibility will be determined by your mortgage lender based on your financial situation and detailed guidelines that will be available on March 4, 2009.

4. I do not live in the house that secures the mortgage I'd like to modify. Is this mortgage eligible for the Homeowner Affordability and Stability Plan?

No. For example, if you own a house that you use as a vacation home or that you rent out to tenants, the mortgage on that house is not eligible. If you used to live in the home but you moved out, the mortgage is not eligible. Only the mortgage on your primary residence is eligible. The mortgage lender will check to see if the dwelling is your primary residence.

5. I have a mortgage on a duplex. I live in one unit and rent the other. Will I still be eligible?

Yes. Mortgages on 2, 3 and 4 unit properties are eligible as long as you live in one unit as your primary residence.

6. I have two mortgages. Will the Homeowner Affordability and Stability Plan reduce the payments on both?

Only the first mortgage is eligible for a modification.

7. I owe more than my house is worth. Will the Homeowner Affordability and Stability Plan reduce what I owe?

The primary objective of the Homeowner Affordability and Stability Plan is to help borrowers avoid foreclosure by modifying troubled loans to achieve a payment the borrower can afford. Lenders are likely to lower payments mainly by reducing loan interest rates. However, the program offers incentives for principal reductions and at your lender's discretion modifications may include upfront reductions of loan principal.

8. I heard the government was providing a financial incentive to borrowers. Is that true?

Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.

9. How much will a modification cost me?

There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.

10. Is my lender required to modify my loan?

No. Mortgage lenders participate in the program on a voluntary basis and loans are evaluated for modification on a case-by-case basis. But the government is offering substantial incentives and it is expected that most major lenders will participate.

11. I'm already working with my lender / housing counselor on a loan workout. Can I still be considered for the Homeowner Affordability and Stability Plan?

Ask your lender or counselor to be considered under the Homeowner Affordability and Stability Plan.

12. How do I apply for a modification under the Homeowner Affordability and Stability Plan?

You may not need to do anything at this time. Most mortgage lenders will evaluate loans in their portfolio to identify borrowers who may meet the eligibility criteria. After March 4 they will send letters to potentially eligible homeowners, a process that may take several weeks. If you think you qualify for a modification and do not receive a letter within several weeks, contact your mortgage servicer or a HUD-approved housing counselor. Please be aware that servicers and counseling agencies are expected to receive an extraordinary number of calls about this program.

13. What should I do in the meantime?

You should gather the information that you will need to provide to your lender on or after March 4, when the modification program becomes available. This includes

· information about the monthly gross income of your household including recent pay stubs if you receive them or documentation of income you receive from other sources

· your most recent income tax return

· information about any second mortgage on the house

· payments on each of your credit cards if you are carrying balances from month to month, and

· payments on other loans such as student loans and car loans.

14. My loan is scheduled for foreclosure soon. What should I do?

Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower's eligibility. We support this effort.

Filed under: Bailout Turmoil • Housing Market • Raw Politics
soundoff (483 Responses)
  1. helps me not!!

    "Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property." This will help some people I know who just bought a home within the last year or so, and that's great for them. My wife and I bought our place in 2006 right before the market crashed, we are now down about 200k from what we first bought at. Even if the real estate market turns around today and home prices started to appreciate to at 3% a year it would take more than 20 years for us to get back to what we originally paid for it. It makes more since for us to just stop paying our mortgage take the hit on our credit save the 2,000 per month that we would save by renting every month and buy a newer bigger home 3 years from now.

    It feels good to get that off my chest, I had to complain to someone. In reality we will not stop paying our mortgage, even thought we don't want to keep living in our small townhouse forever. We took the risk and bought when we did, when you buy a home it's not guaranteed that it will go up in value. Although it would be nice to get a lower interest rate.

    February 19, 2009 at 10:34 am |
  2. elliott

    If the election were held today ,Mcain would win.

    February 19, 2009 at 9:37 am |
  3. wstaten

    To the many fine Americans that are ahead for now of there game. Don't you realize that any of these situation can be you. Many of the people did not ask for the broker to help them afford a home for more than they could afford. We are all to blame for some of the mess that we are in today. I am honest taxpayer who loss her husband about two years ago. I have been struggling month to month on all my bills. My husband was not on my mortgage when we purchased the home. But after the second year of owning my home his name was going to be added. So sometimes situation changes things. (death, marriage, loss of income etc.) These people are not people that made poor choices in life. They had a dream for their family and they proceded to make that dream come true. So to many of you that are left with extra money after your bills have been paid God bless you. But I believe that we are placed here on earth to help our brothers and sisters.

    February 19, 2009 at 9:36 am |
  4. Smith

    Back in August of 08i spoke to my morgage company and they offered me a modification. I was told it wouldn't be finished until January. In January I received the packet to be signed and notorized. Along with this they told me that I need to give them $3020.00 for this modification. Is this allowed? They needed this cashier's check with my signed documents or the contract will be voided. First of all I was told this would cost me nothing. Is this a common procedure?

    February 19, 2009 at 9:32 am |
  5. Reciprocation

    GCV: using your logic, if your home increases in value then
    you shouldn't be happy either. Guess what- the "value" of items
    changes throughout time. Can your home regain value?
    Absolutely. Just because the value is lower now doesn't
    mean you shouldn't have to pay WHAT YOU AGREED TO

    That's like someone buying a PC for $1,000 with a 2 year
    loan, and then complaining 6 months later when the PC
    is worth $300 but they still owe $900- "Why should I
    have to pay for more than it's worth?"

    February 19, 2009 at 9:23 am |
  6. Ethan

    We should let the markets take care of the problem. While I saw many people buying all kinds of things they could not afford, living it up on credit, and getting rich off of flipping houses, I worked hard, payed my bills and saved money. Now that it is time for the irresponsible to pay the piper we are suddenly "all in this together" and the taxes the responsible pay go to subsidize the irresponsible? No way! We are going down a dangerous, slippery slope. When people are allowed to fail, they suddenly innovate. When people are subsidized, they stagnate.

    If we are suddenly going to spend taxpayer money to bail out home speculators, then we should also be asking for all the money home speculators made on the run up of housing prices to be given to the government.

    Saddling this country with more debt will make bankruptcy the only logical choice for the country. How can we ever pay off the debt that has been racked up over the past eight years?

    February 19, 2009 at 9:18 am |
  7. GCV

    Far too many of you are making the assumption that the mortgage crisis is purely the result of individuals making poor financial decisions and mismanaging their money. When actually many people that were responsible with their home purchase are facing mortgage issues due to the plummetting home values. My primary and only mortgage is $365k. My house is now worth $170k and still dropping. I make my payments, but just as I responsibly chose to pay this mortgage, I have to consider responsibly choosing to not pay it. It doesn't make financial sense to pay $365k for something worth only $170k. Would you pay $20 for a loaf of bread that sat next to an identical loaf of bread for $4? So, those of you that are being judgemental dinks, need to back off. Not every body made bad decisions!

    February 18, 2009 at 9:27 pm |
  8. emma ines

    Just wanted to know, I was previously approved by my lender for a modification of my loan, but I did not sign the paperwork because my mortgage was still unafordable. It changed by $49, I have too much debt and we still cannot afford the payment. Can I reapply under the incentive plan?

    February 18, 2009 at 9:16 pm |
  9. Bob

    So is there anything in this plan for a Homeowner with the following stats?
    30 year mortgage @ 5.0%. Made every payment not only on time, but pays $100.00 extra per month towards principal.
    Steady income with no chance of losing job.
    Where is any benefit for hard work and good planning? This plan so far sounds like just helping the people who make bad choices and have bad habits or are criminals?????

    February 18, 2009 at 9:07 pm |
  10. steve murphy

    Why don't they make the people that splurged on these houses move into my modest houses, let me move into their house. I think I could make the payments with a little taxpayers assistance. Maybe even get a pool by refinancing in a few years when house prices rise again.
    What were people thinking.

    February 18, 2009 at 9:03 pm |
  11. Grapevine, TX

    Just an FYI...
    I worked for a "first time home builder" and saw the fast ones that they pulled on their buyers. They owned their own financial company and would direct the unfit buyers through there where they could get them into the home and then sell the note. They would make "contributions" to an "down payment assistance" program that would then turn aroung and give the buyers the money for their down payment and the funds would not have to be disclosed as a gift. Granted, the buyers should have known better but the sales people and the mortgage people were taught to convince these people that everything was great. It was very high pressure. Besides the banks, I know from my experience that a lot of homebuilders are also to blame for a lot of this mess yet all we hear is poor them. The builder that I had worked for sold their mortgage company to Wells Fargo about six months before the owners (privately held company) cashed out and started proceedings to shut down.

    February 18, 2009 at 9:03 pm |
  12. ALEX E.

    My lenders been playing on me and my spouse, I haven't been late in my payments. They promised will notify us for loan modification but never contacted me until I didn't start paying but gave us 5 months lower payment only, what's next? So, we decided to hire an attorney paying $2900.00 100% money back guarantee if were not qualified,trying to gumble. Do you think we can get a solution to modify our loans?

    February 18, 2009 at 7:30 pm |
  13. Sheri

    QUESTION: I have a Fannie Mae loan. Purchased home for $150,000. Have fixed rate 7.87% and also pay $347.00 a month PMI. Owe $146,000. Monthly payment with taxes and insurance $1800.00. I am current on loan. Probably moderate credit score. Would I qualify for refinance under this plan?

    February 18, 2009 at 7:24 pm |
  14. patty

    Please explain: 75 Billion divided into 5 million homeowners= 1.5 million per homeowner
    Should I pray that I will one of the few ?

    February 18, 2009 at 6:42 pm |
  15. chris

    This sickens me to the bone and core of my upbringing. Of course I was taught to care for my neighbors and fellow country men but as some have pointed out, why should I be penalized for being a responsible hard working parent and adult? Whose fault is all of this mess? It does not lie in the past president(s). It lies on the very basic assumption that so many citizens of this nation have come to expect , quoting an 80's band, Money for nothing. They want everything with immediate self gratification without having to scrimp and save for it.

    It disheartens me to see this type of rampant disregard for the old adage that hard work will get you somewhere. Apparently hard work will result in having to pay higher taxes to float the folks that chose the easy way.

    I did not vote for P BO but I sure will have to bear his and his cabinets weight for the next four years....hopefully he will not take (what is left of) my 401K as the democrats are considering.

    February 18, 2009 at 6:41 pm |
  16. chris

    i lost my job in oct 2008 am current on my mortage. we cant blame this problem on each other. this country is screwed. all of us are in this together.

    February 18, 2009 at 6:37 pm |
  17. Shell Bilyew

    I concur with the other people, living "realistically." Why should the hard working tax payers, living within their means, have to shell out for people that were totally irresponsible and got in over their heads? Damn, if I would have foreseen this disaster, I would have gone out and purchased a home that was not within my means.
    I don't even own a home, my husband is unemployed due to the state of the economy, what does this do for us except take money out of our pockets so someone else can retain their home?
    btw- George, democrat, L.A. I am a Republican in L.A. and for your information the Republican party does not hate anyone that is not white, gay or other of other religions. Au contraire, I have friends of many colors, religious backgrounds and gay friends and we all respect each other's point of view.

    February 18, 2009 at 6:22 pm |
  18. Angry Tax Payer

    My case is exactly like Kim. I'm not with Freddie or Fannie, and I'm current on my mortgage AND I'm upside down! Who the hell is resucing me??????

    February 18, 2009 at 6:20 pm |
  19. Grumpy Gambler

    Look I took 25k to vegas last month. I play blackjack and I had very large (4k) bet out and got a pair of 8's the dealer was showing a 5. The book says split the 8's so I did, I picked up a 3 on the first 8 making 11 the book says double down so I did and pulled a 9 for 20, on the second 8 I got another 8 and split again pulled a 2 on the first one for a 10 doubled down and got a Queen for 20 on the third 8 I pulled an Ace and doubled down on the 9 and got a 9 for 18. I followed the rules, I did everything I was supposed to do the dealer turned up her down card it was a 6 so she had 11 she took a hit and got a Jack.... 21.... I lost 24k on one hand.....

    Obama is there any room in your plans for a guy like me. I mean I did everything I was supposed to do, I went to Vegas to try and stimulate the economy and myself at the same time. I played by the rules and I think by anyone's estimation I got burned. Please help me.

    February 18, 2009 at 6:16 pm |
  20. Janelle

    Most of the people that are in trouble with their mortgages now are not people that should have not bought a home or bought a home that they couldn’t afford. The first round of foreclosure that started this economic mess was those who had no business buying a home in the first place. This recent round of foreclosures or soon to be foreclosures are people that have lost their job, lost assets, drained their savings due to unforeseen circumstances, had good credit scores etc.

    I can’t stand when people says that this is happening because some of us deserved this. I can’t help that my sales commission income has gone from $8,000+ per month to less than $4,000 per month. I definitely did not foresee that I would get diagnosed with cancer last year and would accumulate a mountain of debt due to medical expenses and treatment. I definitely never imagined that my house would be worth almost 30% less than when I bought it 5 years ago. Yet I am still employed working twice as hard for half the money and despite of my medical problems somehow, some way barely scrapping by to stay current with all my expenses. How dare some of you tell me that I somehow deserved this for being irresponsible!!!!!!!

    February 18, 2009 at 6:13 pm |
  21. LfromSD

    I am glad they are finally doing something for these middle class families. Think of all the poor children involved. Some of these people were responsible, they could actually afford the mortgage but they were first time buyers and their credit wasnt good, they were told "get an adjustable, you can refi later" then before their pre payment penalty, the housing prices go down and they're stuck... before you know it their rate went from 5% to 12%. How can you not feel bad for these people? They were conned by banks and realtors. I rather see my tax money go to help the people of my country rather than CEO's of banks who arent doing anything to help these people! Im glad that Obama is doing this....he is showing he cares about the people in this country. Im tired of all the other people bickering and pointing fingers. Whats done is done and all we can do is try to help those in need!!!

    February 18, 2009 at 6:10 pm |
  22. BD

    Let me see if I have this right – the very group (Fannie) that is really at the core of our current problems are going to re-finance the toxic loans that got us here in the first place. Is there anything that guarantees the whole problem is not going to happen again? Probably not. Oh, and with Fannie's problems, have their contributions to Dodd, Obama, et al stopped?

    February 18, 2009 at 6:06 pm |
  23. Terri

    I am not suffering because of the present economic situation luckily. I don't need a bail-out but those who need help, I say it is great our President is trying to do something to get the economy moving.

    If you don't need a bail-out, good for you, stop whining because others just might need help. Illness, loss of jobs, housing values sinking in certain areas of the country..all these contribute to our economy being in the condition it is in. It isn't always someone living above their means. Where are these Christian attitudes that so many Americans profess to have.


    February 18, 2009 at 5:55 pm |
  24. Masama

    Disappointed to see the plan WON'T cover the Jumbo Loan borrower. Jumbo Loan used to be only 0.25% higher than conforming loan. Now it's way higher. Does anybody know if there is opportunity to speak out this issue before Mar.4 and make government changing the criteria if possible? Otherwise, it won't be fair. Furthermore, it won't be help to stop house price declining.

    February 18, 2009 at 5:52 pm |
  25. M.J.

    Thanks for the balanced comments from individuals such as the Lisa the Loan Officer, "me" and others who realize that solving economic woes this wide and deep should not become a contest between the "just" and the "unjust". For those who are asking, "where's MY compensation for doing the 'right' things (i.e. lack of financial excess), here are two thoughts: (A) where did you get the idea that you'd get paid or compensated for doing the right thing; what about doing the 'right' and responsible thing being its own reward? and (B) you are supremely arrogant (not to mention ignorant) if you think that doing the 'right things' keeps anyone safe from such an economic sunami. Fall on your knees now and give thanks that circumstances have not devastated your best planning and preparation. Doing 'right' didn't spare Job from suffering nor has it spared a lot of us in this economic downturn. You'd do well to remember that "there but for the grace of God go I." Going forward, those individuals who don't contribute constructive ideas WILL be contributing to a deepening problem.

    February 18, 2009 at 5:49 pm |
  26. andy

    More Obama fluff. Spending billions that we are borrowing from other countries to help people who pruchased housing they could not afford. All this while Barney Frank sat there in charge of Fanny Mae and Freddie Mac talking about how great they were when he knew that they were a mess. These tax and spend liberal plans will destry America and we will owe debts that we cant pay.

    February 18, 2009 at 5:46 pm |
  27. Wendy

    Maybe I should go buy a home that I cant afford, or fail to read the fine print, default on my loan, but have no fear because our socialist government will bail me out....people that is why there are apartments. Do not buy a home until you are ABLE to. The US Constitution states people have the right to Life, Liberty, and the PURSUIT of Happiness.....no where does it say my tax dollars are to security your happiness. What a joke....

    February 18, 2009 at 5:45 pm |
  28. shalini

    i have a question , my house has lost almost 50% of the value. How is the bailout plan will be helping us. We have never been late on our payments.It seems that acting responsibly has not helped us and I do not see anything which seems will help us.

    February 18, 2009 at 5:42 pm |
  29. George - Los Angeles

    I'm a Democrat who is really concerned with how this mess is being handled. Home prices and mortgages need to come down to a place where working folks can afford them. I hate to say the Republicans are right, but their initial plan of simply offering a $15,000 tax credit for any new home buyer and 4% mortgages or refinances for any credit worthy responsible individuals seems like a good idea.

    Quick, simple and to the point. It would provide stimulus and get people spending again.

    I hear what the President claims, but it really seems the irresponsible are going to be saved while those of us that played by the rules will be left without getting a break from the government. If the Republicans didn't pander to those that hate anyone who isn't white, straight, and Christian I'd consider changing parties!!!

    February 18, 2009 at 5:40 pm |
  30. Meredith

    When my husband and I bought our first house 2 years ago, our lender tried to talk us into all sorts of slick loans to buy a $500,000 house. We had done scrupulous budgeting and knew we couldn't afford more than $280,000. We rejected his persistent coercion and bought a house for $280,000. It's a tight budget, but we make our payments on time every month. Had we gone with his sneaky arm and balloon loans, we would be facing foreclosure in a few years (well, not with this new bailout). My point is - much of this housing crisis originates with dishonest lenders who wanted a quick bonus and didn't care what their customer's finances would be in the future. However, much of the crisis is also due to borrowers who stuck their heads in the sand and were greedy. My husband and I were cautious enough to read the fine print and know our own budget. I know many people are in danger of losing their homes for legitimate reasons such as a job loss. But too many face foreclosure because of their own negligence. And that makes me really mad.

    February 18, 2009 at 5:39 pm |
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