The New Foreclosure Prevention Plan & How it Affects You

I am the first to admit that many of the new 'bailout' plans and modifications have created much confusion for me (and I believe my fellow Americans too). Most folks want to know, "what's in it for me?" I don't blame them. If you've been one to pay your mortgage on time, and you owe less than what the house is worth-- don't count on much, if anything to befall you as far as a bailout goes. The mortgage bailout of 2009 is expected to aid one in nine US homeowners. In this posting, I will try to simplify what I have learned from reading up on the latest Obama efforts to prevent further foreclosures from happening. Most of what I learned came from the Wall Street Journal's March 5, 2009 expose on the subject.

First of all, there are two options available to those who qualify.
1) Loan Modification, which is specifically tailored to homeowners who are having trouble making their monthly mortgage payments because their interest rate has gone up, or their income has shrunken
2) Loan Refinancing, which is for borrowers who have been denied refinancing, perhaps due to a drop in their home's value.

Here are the ins and outs of both options. The one you may qualify for depends on your situation.

To qualify for a Loan Modification, this is what you need to prove:

1) Your payment is more than 31% of your pretax monthly income, and you can show it is a hardship for you to make your monthly payment.
2) You occupy a single family home and can prove it's your primary residence.
3) You have an unpaid principal balance of $729,750 (or less).
4) Your mortgage was originated on or before January 1, 2009.
5) You will have to make all modified payments over a trial period of three months or more.

*You will not qualify for loan modification if any of the following apply: the mortgage in question is not on your primary residence, you aren't about to default on the mortgage, your home is vacant or condemned, your unpaid principal balance is more than $729,750, your mortgage is packaged into securities whose rules strictly forbid modification, and/or your loan servicing company cannot be reached, or is unable to consider loan modification.

To qualify for a Loan refinancing, this is what you need to prove:

1) Your mortgage is owned or guaranteed by Fannie Mae or Freddie Mac
2) You are current on your mortgage payment
3) You can prove your ability to afford the new mortgage debt
4) Your mortgage balance can be no more than 105% of the current estimated value of your home.

*You will not qualify for a loan refinancing if your loan is not owned or guaranteed by Fannie or Freddie, you have been more than 30 days late on any payment in the last 12 months, you cannot afford the new mortgage debt, and/or your home's value has fallen to the point that you owe more than 105% of the estimated current market value of the home.

That's it in a nut shell. Hopefully simplified! Click here to link to the Wall Street Journal article, which will provide you with further details of the mortgage bailout plan. Also, check out this link, which comes directly from the U.S. Tresury Department. Details of the Mortgage bailout plan

Please feel free to call me with any questions about this posting, or if you would like more information about buying or selling a home in Tucson, and/or general infromation about Tucson real estate. Have a great weekend!

Written by Sarah Ley,
BSBA, ABR, CRS, CHNSA
Realtor with Long Realty Company
Direct: (520) 404-0544
www.sarahley.longrealty.com
sley@longrealty.com