2009 Mortgage Relief Plan

19 Feb 2009 · Kurt

Who is Eligible?

Borrowers must live in their homes and have a loan that is owned or guaranteed by Fannie Mae or Freddie Mac. That means the investor or owner of the note must be Fannie Mae or Freddie Mac, not the company that services the loan, such as Countrywide, Chase, or Aurora (these are loan servicers and only sometimes the actual investor.)

This does not apply to investment properties, rental properties or second homes.

To find out if your loan is owned by Freddie Mac or Fannie Mae please use the information below:

For Fannie Mae’s Resource Center, the telephone number is 1-800-7FANNIE or 1 800 732 6643 (8 a.m. to 8 p.m. EST) or inquire online HERE

For Freddie Mac, the telephone number is 1-800-FREDDIE or 1-800 373 3343 (8 a.m. to 8 p.m. EST) or inquire online HERE

Alternatively, a borrower may contact the lender or loan servicer to inquire as to whether the underlying loan is owned or guaranteed by Fannie Mae or Freddie Mac.

Who is NOT Eligible?

If your loan is NOT owned by Fannie Mae or Freddie Mac, then this federal plan does not apply to you. It does not mean your loan cannot be modified but it will be entirely up to the entity who owns your loan or note, at thier own discretion, and they DO NOT have to comply to these guidelines.

Also again, even if your loan is owned by Fannie Mae or Fredddie Mac, but the property is an investment property, rental, or second home, then this federal plan will NOT apply.

And the 2009 Mortgage Relief Plan doesn’t address the problem of borrowers with second mortgages, such as home equity lines of credit. Any modification or refinancing would apply only to the primary mortgage.

The 2009 Mortgage Relief Plan also does not help borrowers with “jumbo” mortgages — generally those above $417,000 in much of the country , or as much as $730,000 in higher-priced areas. That could be a significant gap in parts of California,more specifically San Diego and other areas that had superheated home markets.

What is it?

The 2009 Mortgage Relief Plan has two main elements aimed at the twin problems feeding the foreclosure crisis that is claiming more than 6,000 homes a day: “underwater” mortgages on which the balance owed is more than the current value of the property, and unaffordable loan payments that are forcing homeowners into default.

One part would allow borrowers whose homes have lost value to refinance their mortgages at today’s relatively low interest rates, even if the homeowner has little or no home equity left, up to a loan amount of 105% of the current market value.

The opportunity to refinance will help “homeowners who have played by the rules [and] have been making their payments on time” but have been unable to refinance because collapsing housing prices have eroded the equity in their homes.

NOTE: Due to the fact that many San Diego homeowners are much more upside down than 5%, this option does not really apply as a viable option. Only if your home is upside down by 5%, and you can qualify for a fully documented loan, meaning you can provide proven and written tax returns, job verification and income verification, will this portion of the plan help you!

The second part of the 2009 Mortgage Relief Plan is a loan modification program designed to keep troubled homeowners out of foreclosure and to keep “at risk” borrowers from defaulting in the first place. It would accomplish that by offering new incentives to lenders and mortgage servicers to modify loans.

If the lender agrees to reduce the monthly payment to 38% of a borrower’s monthly income, the government will pay half of the additional cost of lowering the payment to 31% of the borrower’s income. They will do this by first reducing the interest rate to as low as 2%, then by extending the terms of the loan to 40 years, then possibly forebearing interest on principle. Principle Reduction is NOT required as part of the plan and is strictly voluntary. You will STILL owe what you owed in the beginning, possibly more; if they tack on any missed payments, late fees, or missed property tax payments, when you go to sell the home in the future.

Once these things have been done to get the loan payments to 38% of the borrowers income, they will compare against a formula what is called a Net Present Value (NPV). If the bank determines it will make more money by keeping you in the home with the lower payment then you will get an approval for a loan modifciation. If the NPV determines that the note owner would be better served not do the modification, then it will be denied and the home owner will be left to determine if they should short sell the property, let it go to foreclosure, or find another means of income in order to continue to make the current payments on the loan.

Unlike earlier foreclosure prevention efforts, the plan doesn’t require that homeowners be behind on their mortgage payments to be eligible for help. In fact, the program will pay loan servicers a higher incentive fee if a modification is done before a borrower falls behind.

Does My Lender Have to Help Me if I Do Not Have a Fannie Mae or Freddie Mac Loan?

What the loan-modification part of the plan does not do is mandate that other lenders or note owners other than Fannie Mae or Freddie Mac take part in either of the programs. But financial institutions that have received capital infusions under the $700-billion Troubled Asset Relief Program will be required to follow the plan guidelines of doing loan modifications.

Furthermore, the plan doesn’t require lenders participating in the loan modification plan to reduce the principal of mortgages on houses that have lost value. The modifications will lower monthly payments, but the homeowner’s outstanding debt will not change.

Kurt Wannebo
San Diego Real Estate and Investments

Kurt Wannebo

California / San Diego Real Estate & Investments / Broker Kurt · 3636 Nobel Drive · Suite 170 · San Diego, CA 92122

Phone: 1.888.473.7324 · 858-412-5541 · Email: info@sdreai.com

CalBRE#: 01468255

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