Do I have to fall behind on my loan payments to be eligible for a loan modification?
No, but borrowers do have to demonstrate that they are in danger of staying current on their mortgage payments and that they don’t have enough income to make their mortgage payments. That could help borrowers whose interest rates are resetting or who have lost their jobs.
Who is eligible for a loan modification?
The program is open only to primary residences and homeowners who are paying more than 31% of their monthly gross income on mortgage payments. Jumbo loans, which exceed Fannie or Freddie loan limits, are not eligible. Final eligibility will be determined by your mortgage lender. (Some ineligible Americans are riled up.)
Can I modify a second mortgage?
No. Only first mortgages are eligible.
Is my lender required to participate?
No. Lenders participate on a voluntary basis, but the government is providing subsidies to encourage lenders and servicers to modify loans. Mortgage servicers, for example, receive $1,000 upfront for each loan modification and can receive an additional $1,000 annually for three years if the borrower stays current on the loan. (Plan is heavy on incentives to modify loans.)
Will the government reduce the size of my loan?
For those eligible for the government-subsidized loan modification, borrowers can receive a reduction in loan principal of $1,000 annually for five years if they stay current on their modified loan.
Borrowers who aren’t able to qualify for a loan modification because they aren’t in danger of defaulting on their loans may still be able to refinance their loans to take advantage of low interest rates.
Can I refinance my loan if I owe more than my property is worth?
Borrowers with little or no equity can refinance into a 30-year or 15-year fixed-rate mortgage at current rates as long as the amount owed on a first mortgage does not exceed 105% of their home’s current value. The refinance program is only open to borrowers with conforming loans that are owned or guaranteed by Fannie Mae or Freddie Mac. Borrowers must be able to demonstrate that they are current on mortgage payments and that they will be able to meet the new payment terms on the first mortgage.
How do I know if my mortgage is owned or guaranteed by Fannie or Freddie?
The White House will release full eligibility details on March 4, when the program begins, and it is recommending that borrowers contact their lender at that time to see if their mortgage is owned or guaranteed by Fannie or Freddie.
What happens if I have a second mortgage? Can I still refinance?
Borrowers with more than one mortgage may be eligible to refinance as long as they owe less than 105% the value of their property on the first mortgage. The second mortgage holder will have to agree to remain in a second position on the home.
Are jumbo loan holders eligible?
No. Only those who have mortgages owned or guaranteed by Fannie or Freddie can apply, and the government-held mortgage companies don’t guarantee jumbo loans.
Comments