The Homeowner Stability Initiative is expected to help up to 5 million Americans lower their monthly payments and avoid foreclosure. Do you qualify for participation?
The Obama administration's Making Home Affordable (MHA) plan went into effect March 4, 2009. That means from now until January 31, 2012 troubled homeowners may be able to get their lenders to adjust their mortgage loan terms and decrease their monthly payments.
Overview of Making Home Affordable
With the current economic recession, many people are suddenly unemployed or forced to take pay cuts. This leaves them unable to pay monthly payments on their mortgages, and American foreclosures have reached record highs. In an effort to help stabilize the housing market and the economy, the President introduced the MHA plan. This plan includes a $75 billion Homeowner Stability Initiative to facilitate successful loan modifications and prevent foreclosures through 2012.
Objectives of Loan Modification
Many homeowners have experienced a decrease or loss of income during this economic recession, and their monthly mortgage payments have suddenly become too high a percentage of their income. MHA loan modification aims to work with lenders to get eligible homeowners' payments to 31% of their gross monthly income.
Procedure for Adjusting Loans: The Standard Waterfall
Lenders participating in the MHA plan need to follow a procedure called the Standard Waterfall in order to receive Homeowner Stability Initiative dollars. According to the Standard Waterfall, lenders modifying loans must:
Perform interest rate reductions to get a borrower's monthly payments to 38% of their gross monthly income. The rate is reduced in increments of 0.125% down to a floor of 2%.
If the goal of 38% of gross monthly income is still not reached, the lender may extend the term of the loan up to 40 years from the time of modification.
If the goal of 38% of gross monthly income is still not reached, the lender can begin to forbear principal (due in a balloon payment upon maturity of the loan).
After the lender gets the payment to the 38% goal, the U.S. Treasury will match further reductions dollar-for-dollar until the new monthly payment is within 31% of the homeowner's gross monthly income.
There will be a 90-day trial period with the new loan terms. If the homeowner is still current at the end of the three month period, the modified terms will stay in effect for the next 5 years.
Lenders are not forced to participate in MHA loan modification. They are asked to analyze whether modifying the loan as described above would be more profitable than foreclosure, and to choose the more profitable option.
Monetary Incentives Under Making Home Affordable
The MHA plan includes financial incentive payments, both for lenders and borrowers. Lenders receive a Servicer Incentive Payment of $1,000 for each eligible modification in addition to Pay for Success Payments of up to $1,000 per year for 3 years as long as the borrower stays current on the modified loan.
Homeowners also receive Pay-for-Performance Success Payments of up to $1,000 a year for up to 5 years if they make on-time monthly payments on their modified mortgage loan. These payments go straight to reducing the principal balance on the loan.
Eligibility Criteria for Loan Modification
To qualify for loan modification under MHA, you must meet the following criteria:
your monthly payment exceeds 31% of your gross monthly income
your loan is insured by Fannie Mae or Freddie Mac
your loan originated before January 1, 2009
your loan has an unpaid principal of less than $729,750
you are the primary occupant of the home (not an investor or house flipper)
The Making Home Affordable plan is the President's attempt to steady the economy by avoiding millions of foreclosures nationwide. Under the Standard Waterfall, qualifying borrowers' monthly mortgage payments can be reduced to 31% of their gross monthly income.
The copyright of the article Obama's New Loan Modification Plan Guidelines in Mortgage Negotiation is owned by Jenny Evans. Permission to republish Obama's New Loan Modification Plan Guidelines in print or online must be granted by the author in writing.
I found the best info on this plan on www.homeaffordplan.com
They had a better eligibility calculator that told me what I was eligible
for and directed me to Citibank's application for the program and my
application is on track for approval.
I'd recommend trying the
Treasury calculator but also comparing your results on:
www.homeaffordplan.com
Apr 18, 2009 3:26 AM
Guest :
I think that it is great that Obama wants to help home owners. The out
come however after 5 years is not great if the home owners still have not
fouond work to cover what their new payment is going to be. Plus there
are organiations like the NewleafMod.com that are wanting to charge up to
35000 to modify loans. This is prey to those of who are struggline
now.
Aug 16, 2009 3:11 PM
Guest :
Oh how nice that Obama wants to help the homeowners who have a Fannie Mae
or Freddie Mac backed investor loan. But, what about the homeowner who has
Deutsche Bank as their investor. They are not willing to help modify any
loans, so we are just out of luck I guess. We put almost $200K down on our
house. I guess Indymac Bank doesn't have a problem foreclosing on our home,
they are already way ahead.
Sep 7, 2009 7:49 AM
Guest :
I tried since March to have Wells Fargo re-do my mortgage & I have
perfect credit, they have come up with every excuse in the book. This plan
is just another failure for consumers!
Sep 19, 2009 9:14 AM
Guest :
I tried Wells Fargo!! What a crock! Obama made it sound so easy.. Just
call you mortgage co and they will modify your mortgage! Yeah right!!! My
husband has been laid off for a year and still no one will help us...
Sep 19, 2009 3:14 PM
Guest :
If you have Deutsche Bank as your lender...sell your home if you need a
loan mod. Per OneWest "DEUTSCHE BANK IS NOT DOING LOAN
MODS..PERIOD..NO MATTER WHAT THEY TELL YOU OR WHAT FORMS TO FILL OUT..YOU
ARE WASTING YOUR TIME..NO MATTER WHAT ANY LOAN MOD COMPANY TELLS YOU..this
is as of 9/19/09. Good Luck
Oct 3, 2009 3:17 AM
Guest :
One west bank is trying its best to do the modification of all the loans
whether they are in foreclosure or not the thing is that most of the time
lenders do not provide the exact information which is being asked by
modification team which cause delay sometimes.
Oct 8, 2009 7:32 AM
Guest :
Do not believe the OneWest Bank comment that they are trying to help. That
is not true. deutsche bank a foreign owned bank is one of the largest
lenders doing forclosures in this country. They have no interest on
modifying anyone including those that qualify for Obamas plan. As a
homeowner just prepare yourself if they are your investor. Onewest will
waste your time looking good for their reports to the government that they
took your mod papers but the reality is that they will tell you the
Deutsche Bank doesn't do them in the end.
Oct 8, 2009 7:34 AM
Guest :
If you want the truth google Deutsche Bank loan mods and see the stories of
desperation and NO success.
Oct 14, 2009 1:59 PM
Guest :
my loan is backed by Deutsche and I am approved for the Make Home
Affordable plan. They didn't adopt the plan till August 31st but they are
offering it. They (First Franklin) gave me 2% interest rate and a 40 year
term. Don't give up.
Oct 31, 2009 8:50 AM
Guest :
We have Litton and they are refusing as well. They won't recognize the
second at all and tell us we make too much money??? It isn't that hard to
calculate, 31% of gross is pretty simple to figure out??? They just don't
want to help anyone and as usual Obama has put no watchdog in place to make
sure the banks are held accountable. All this after the Amnesty Bill to
let illegal aliens get a free pass. How about we take care of our own
first!
Mar 12, 2009
