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Understanding the “Making Home Affordable” Program

Below are the general guidelines for the Making Home Affordable program. NWFCU is participating in the program, however, our internal eligibility and requirements may vary.

Earlier this year, President Obama introduced the Making Home Affordable program (also known as the Homeowner Affordability and Stability plan) to help millions of Americans avoid foreclosure by allowing them to restructure or refinance their mortgage. This two-part plan does not address all mortgages, however. Homeowners must meet specific criteria for both plans and only those loans held by Fannie Mae or Freddie Mac are eligible for the government’s plan.

If your mortgage loan is currently held by NWFCU or is owned by Fannie Mae, we may be able to help you lower your monthly payments by refinancing your existing fixed rate mortgage to a more affordable rate or term. However, NWFCU cannot assist you under this plan is if your loan is owned by Freddie Mac since Freddie Mac requires that you obtain the refinance through your existing mortgage servicer. 

If you are hoping to refinance a mortgage based on the federal stimulus plan, your first step is to determine if the loan is owned by Fannie Mae or Freddie Mac. The quickest way to find out is to visit: www.fanniemae.com/loanlookup  or www.freddiemac.com/mymortgage, or call 1-800-7FANNIE (8am-8pm EST) or 1-800-FREDDIE (8am-8pm EST). Once you determine whether or not your mortgage qualifies, your next step is to determine if you meet the criteria and which plan is right for you: Loan Refinance or Loan Modification. 

PART ONE: “Home Affordable Refinance.”  According to Moody’s Economy.com, at the end of 2008, an estimated 13.6 million Americans owed more on their homes than their properties were worth. As a result, many homeowners have been unable to refinance to a lower rate, even if they are current on their loan payments. Home Affordable Refinance was created to provide a low-cost refinancing option for responsible homeowners who are suffering from falling home values. The program allows owners to refinance up to 125% of their current home value, and there is no income ceiling for applicants. To take advantage of this program, you must meet the following criteria:

Borrowers with a first and a second mortgage (i.e. equity loan) may also be eligible to refinance under this program, as long as the amount due on the first mortgage is less than 125% of the value of the property. However, under this program your second mortgage cannot be combined with your refinanced mortgage. The lender holding your second mortgage must be willing to be the subordinate lender (in a secondary lien position).  

Prior to initiating the refinance application, you may want to consider contacting your existing second mortgage holder to determine if they would be willing to permit the subordination. Some lenders are not willing to allow the subordination which would prohibit the refinance transaction.   

If you currently owe more than your home is worth, keep in mind that refinancing won’t reduce the amount you owe, but a lower interest rate will lower your monthly payment and may reduce the amount of interest that you’ll pay over the life of the loan.

To apply for a refinance of your mortgage under this plan, contact your lender. You’ll need the following information when you apply:

Your lender will provide you with a Good Faith Estimate that will include your new interest rate, mortgage payment and the amount you will pay over the life of your loan. Compare this information to your current loan terms; if it isn’t an improvement, refinancing may not be right for you. If you do decide to refinance, your transaction must be closed and funded on or before June 10, 2010, when the Making Home Affordable refinance program expires.

If your existing loan has private mortgage insurance, your current mortgage insurance will carry over for the refinanced loan. If you don’t currently have private mortgage insurance (PMI) , you won’t be required to obtain it for the refinanced loan under the stimulus plan — a substantial savings for many homeowners.  Under the stimulus plan, you may be able to include some of your closings costs in the refinance but the amount permitted depends upon the loan-to-value of the new loan and the amount allowed by the PMI company.  

PART TWO: “Home Affordable Modification.” This part of the stimulus plan was designed for homeowners who are struggling to keep their home due to a documented financial hardship (temporary job loss, divorce or separation, reduced income). Lender participation in the program is voluntary. To qualify for a loan modification the homeowner must be in danger of losing the home and must meet the following criteria:

Having Trouble Paying Your Mortgage? Talk to Us
Although the President’s stimulus program will benefit many Americans, not every homeowner will qualify. NWFCU will continue to work with members on a case by case basis to help those who are looking for ways to make their payments more affordable. If you have recently missed a mortgage payment or feel that you’re about to due to job loss or other financial hardship, call us at 703-709-8921, ext. 70007 (1-866-709-8921 toll-free), Monday-Friday 8:00am-4:30pm or email us at mortgages@nwfcu.org. NWFCU is committed to helping you stay in your home, avoid damage to your credit rating and avoid foreclosure if at all possible.

Fear of losing your home can be paralyzing, but the worst thing you can do is nothing. Before you or someone you know takes action, make sure you are dealing with your actual lender, loan servicer or a qualified HUD counselor. Sadly, unscrupulous people and predatory companies are eager to take advantage of a desperate situation.
For more information about the government’s new Making Home Affordable program, visit www.makinghomeaffordable.gov.

To view frequently asked questions, click here.

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