Making Home Affordable program takes effect

March 4, 2009 3:20:30 PM PST
As of today, homeowners can start taking advantage of the Obama administration's new $75-billion foreclosure prevention program. It's expected to help as many as 9-million homeowners.

The guidelines for the program were just released this morning and under it, loans can be adjusted immediately. The plan will be in effect until the end of 2012, but mortgages can only be modified once, so make sure you get it right the first time.

The Making Home Affordable program has two major parts.

The first is to modify loans for borrowers who are at risk of default or already behind in their payments.

The goal is to make monthly payments equal to no more than 31-percent of a homeowner's monthly gross income.

But to qualify: loans must have originated on or before January 1st of this year, they must be for a primary home an owner lives in, and the unpaid principal can amount to no more than $729,500.

There are financial incentives to participate. For instance, companies can receive $1,000 for certain loan modifications and both consumers and companies can receive $1,000 for each year a borrower then successfully stays in the program.

The second part of the foreclosure prevention package allows for refinancing for homeowners who've kept current on their payments but are underwater - meaning they owe more than the home's market value.

Normally, these folks have so little equity in their homes they haven't been able to refinance, but under this program, homeowners whose mortgages are owned or financed by Fannie Mae and Freddie Mac would have until June 2010 to refinance into new low interest rates.

But homeowners whose mortgages are underwater by more than 5-percent are out of luck.

Also you cannot be unemployed; you must have sufficient income to make the monthly payments.

And again, jumbo loans of $729,750 or more, don't qualify for this part of the program either.

RELATED LINKS:

http://www.treas.gov/press/releases/reports/modification_program_guidelines.pdf

http://www.hud.gov/

http://www.treas.gov/press/releases/reports/housing_fact_sheet.pdf

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