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THE MISSION OF A NEW U.S. PROGRAM: MAKING HOME AFFORDABLE

The President's plan seeks to help 7 to 9 million homeowners restructure or refinance their mortgages to avoid foreclosure

Updated April 2, 2009

On March 4, 2009, President Obama's administration unveiled the details of a new government-backed program which aims to help millions of homeowners get better mortgages and stay in their homes.

The Homeowner and Affordability and Stability Plan will be better known as "Making Home Affordable." It went into effect on March 4.

There are two main parts of the President's mortgage plan:

  • The Home Affordable Refinance
  • The Home Affordable Modification

You can also get more information about the program at MakingHomeAffordable.gov, the Federal Government's new website about the program.

Refinancing

This part of the program is designed to help homeowners who are current on their mortgage payments, but unable to refinance their homes to a lower interest rate because the value of their home has dropped significantly. These homeowners may now be able to refinance into a 30- or 15-year, fixed-rate loan.

These benefits are only available to homeowners whose mortgages are held or securitized by Fannie Mae or Freddie Mac. You can check the webpages for Fannie Mae and Freddie Mac to see if this applies to your home. Also, you must not owe on your first mortgage over 105 percent of the current market value of your home.

You can apply for this program with your lender now, but please be patient. The program is brand new and lenders are still working out the details.

Modification

This part of the program is designed to help homeowners who are struggling to afford their mortgage payments and are facing foreclosure. It's similar in structure to the Hope for Homeowners plan, which was set up last year by President Bush and available now.

The new Homeowner Stability Initiative is designed for homeowners who:

  • Live in their home
  • Got your current mortgage on or before Jan. 1, 2009
  • Have a monthly mortgage payment that is more than 31 percent of their total monthly income, and
  • Owe, on your first mortgage, less than $729,750.

The government will work with lenders to lower interest rates for five years so homeowners can afford payments at 31 percent of their income. The government will financially reward both lenders and homeowners if they avoid foreclosure, modify their loan and remain current for five years.

In this part of the program, lenders will contact you if you might be eligible. This will take place over several weeks following March 4.

If you think you are eligible but do not hear from your lender after a few weeks, you can call your lender or a HUD-approved counseling agency to see if you are eligible.

What you can do now

Go to MakingHomeAffordable.gov and use their online tool to see if you might be eligible for the programs.

You should also gather your information, including:

  • Information about your income, including two recent pay stubs or other proof of income
  • Your most recent tax return
  • Information on a second mortgage, if you have one
  • Payments on your credit cards, if you are carrying a balance, and
  • Payments on other loans, like car loans or student loans.

You can call the Department of Consumer Affairs' Real Estate Information division at (800) 973-3370 for up-to-date information on this plan and other real estate issues.

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