If you are one of millions of home owners who’s either behind on a mortgage, or who has a mortgage that is more than the value of the home, there are two federal programs that you may be eligible for that can help you keep your home and reduce your payments. Also, one of the largest banks has set up a special program for its borrowers.
A new program created by the Federal Housing Administration (FHA) requires lenders to reduce the principal by at least 10% for qualified borrowers. You can qualify for the FHA principal reduction program if you are current on your payments and the loan was acquired from a failed bank seized by the FDIC. Not always easy hurdles to reach. One thing I like about this program is you are not required to have an FHA loan. Loans can be as high as 115% of the value! The bank is required to grant a principal reduction that brings the new FHA loan’s LTV to 97.5%. In addition, it must make the new payments account for 31% of the borrower’s gross monthly income including second lien mortgages.
The Federal Government’s Home Affordable Refinance Program, or HARP has been extended for one year. This program was set to expire on June 30th. Fannie Mae and Freddie Mac will continue to refinance qualifying borrowers who have lost equity in their home without requiring additional mortgage insurance. Freddie Mac will exempt any refinancing from recently announced price increases, according to the Federal Housing Finance Agency in announcing the one-year extension. In addition, Fannie Mae is extending its previous Jan. 1, 2009, eligibility date by five months and will now consider HARP refinancings of loans made on or before May 31, 2009.
Only borrowers who are current on mortgages that are already owned or guaranteed by Fannie Mae and Freddie Mac are eligible for the program. Although loans of up to 125 percent of a home's current market value are eligible, the vast majority of loans refinanced to date under HARP have had loan-to-value ratios of 105 percent or less. Visit the following links to see if your mortgage falls under Fannie or Freddie. http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx http://www.makinghomeaffordable.gov/get-assistance/loan-look-up/Pages/default.aspx
Another program has been initiated by one of the major private players.
On June 2, Bank of America began its new mortgage program for eligible underwater borrowers which includes an earned principal forgiveness in a loan modification. Bank of America mailed out an initial round of letters notifying customers who may qualify. Upon review of these customer applications, the first trial offers for the program could find their way to distressed borrowers as early as the second half of June. If you are a BOA client, but did not receive a letter, I suggest that you reach out to them to see if you can be qualified for it.
For qualifying borrowers, the bank will employ a principal reduction as the first step toward reaching The Home Affordable Modification Program’s (HAMP) affordable payment target of 31 percent of household income, ahead of lowering the interest rate and extending the term. The reduced principal balance will be a non-interest bearing forbearance amount and the homeowner may earn forgiveness of the forborne amount by remaining in good standing on payments for several years.
To be eligible for principal forgiveness under the Bank of America plan, the amount of principal owed must exceed the current property value by at least 20 percent and the loan must be at least 60 days past due. In addition, the loan must have been originated by Countrywide before January 1, 2009.
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