Stay in Your Home With the Making Home Affordable Program

In March 2009, the federal government introduced the Making Home Affordable program. As the name implies, its purpose is to help struggling homeowners stay in their homes by giving them affordable, sustainable mortgages. There are two ways this can be accomplished: loan modification or refinancing.

The loan modification programs are for homeowners who are no longer able to make their monthly mortgage payments, whether they are current or have fallen behind. The refinance program is for homeowners that are current on their mortgage and want to reduce their interest rates, but have been unable to do so because their home’s value has dropped.

Loan Modification
Whether you are current on your mortgage loan, or you have already missed one or more payments, if you are no longer able to make your monthly payment, you may qualify for a loan modification to make it more affordable.

Home Affordable Modification Program (HAMP)
Under the Home Affordable Modification Program, borrowers’ existing loans are modified so that the monthly mortgage payment does not exceed 31% of their gross income. Modification can include a reduction in the interest rate, extension of the repayment period, and deferred payment or even forgiveness of some the principal balance. The 31% guideline applies to the first mortgage. If a borrower has both a first and second mortgage and receives a modification on the first mortgage, he or she will automatically receive a modification on the second mortgage if the lender is participating in the program.

In order for you to be eligible for the program:

  • You are currently delinquent or run the risk of falling behind on your loan.
  • The house that secures the mortgage must be your primary residence and contain no more than four units.
  • The property must not be condemned.
  • The amount you owe on your first mortgage must be equal to or less than $729,750 (for a single family home).
  •  Your current mortgage payment (including taxes and insurance) must be more than 31% of your gross income and unaffordable due to a recent change in circumstances, such as a reduction in income, mortgage payment increase, or increase in medical or other essential expenses.
  • The loan must have been taken out on or before January 1, 2009.

Unlike the refinance program described below, your loan does not need to be owned or securitized by Fannie Mae or Freddie Mac in order for you to participate. It’s up to individual lenders to determine if they are participating in this program. If you are interested in the Home Affordable Modification Program, you should contact your loan servicer to see if they are participating. If so, they will tell you what documentation you need to submit to start the application process. Generally, this will include pay stubs and tax returns to document your income, verification of your assets, and an accounting of all of your debt.

You and your servicer will complete the necessary steps to determine whether the modification program is appropriate for you. This will include assessing your financial situation, and you may be required to complete financial counseling. Once approved, they will put you on a trial modification for three months at the new interest rate and payment level. During this time period, the servicer must determine if you are eligible for a Hope for Homeowners refinance. (This is different from the refinance program discussed below). Under Hope for Homeowners, your mortgage is refinanced to a fixed-rate loan for no greater than 90% of your home’s current market value. If you are not eligible for Hope for Homeowners but successfully make the payments under the trial period, your servicer will execute a permanent modification agreement that will lower your interest rate to a fixed rate for five years and then is capped at a low rate for the remaining life of the loan.

The program expires on December 31, 2016.

Hardest Hit Fund (HHF)
A program in 18 states plus the District of Columbia that uses a combination of modification, mortgage payment assistance, principal reduction and transition assistance programs to help struggling homeowners (varies by state).

In order for you to be eligible for the program:

The program expires on December 31, 2017.

Home Affordable Unemployment Program (UP)
This program reduces your payments to 31 percent of your gross income or can suspend your monthly mortgage payment for up to 12 months while you search for a job.

In order to be eligible for UP you must meet the following criteria:

  • You are delinquent or in danger of falling behind on your mortgage due to unemployment.
  • The loan must have been taken out on or before January 1, 2009.
  • The property must not be condemned.
  • You owe up to $729,750 on your primary residence or one-to-four unit rental property (loan limits are higher for two- to four-unit properties).

To participate in the UP program, see if your mortgage company is participating. If so, contact your lender or servicer to see what type information and documentation they will need to begin the application process.

The program expires on December 31, 2016

Refinancing
When interest rates drop, many borrowers want to refinance to save money. Refinancing is also an attractive option for borrowers with adjustable-rate mortgages that are about to reset. Unfortunately, for borrowers whose home value has dropped significantly, getting approved for a new mortgage can be fairly difficult.

Home Affordable Refinance Program (HARP)

The Home Affordable Refinance program allows borrowers whose loan to value ratio (loan balance compared to the market value of the home) is too high to be approved for a conventional mortgage refinance. The goal of this refinance program is to reduce interest rates to ensure the payments are affordable today and sustainable over the life of the loan.

The eligibility requirements for the program include:

  • The house that secures the mortgage must be your primary residence and contain no more than four units.
  • Your loan must be owned or securitized by Fannie Mae or Freddie Mac. (Not sure who owns your loan? You can find out if your loan is owned by Fannie Mae by visiting www.fanniemae.com/loanlookup or calling 1-800-7FANNIE. For Freddie Mac you can visit www.freddiemac.com/mymortgage or call 1-800-FREDDIE.)
  • You must be current with your mortgage payments. (Current is defined as not having been more than thirty days late in the past twelve months.)
  • The loan must have been taken out on or before March 31, 2009.
  • Your loan-to-value ration must be greater that 80 percent.

To participate in the refinance program, contact your lender or servicer to begin the application process. You will need to provide information and documentation about your income and debts. If your mortgage is with Fannie Mae, you can apply for a Home Affordable Refinance loan with any Fannie Mae approved lender.

The program expires on December 31, 2016.

Federal Housing Administration Refinance for Borrowers with Negative Equity (FHA Short Refinance)
This program helps homeowners that owe more than your home is worth and want to refinance.  The FHA Short Refi could get you into a more affordable, more stable, FHA-insured mortgage.

The eligibility requirements for the program include:

  • Owing more on the mortgage(s) than the current value of the property.
  •  Being current on the existing mortgage, or having successfully completed a qualifying three-month trial payment plan.
  • The house that secures the mortgage must be your primary residence.
  • Having a “FICO based” decision credit score greater than or equal to 500.
  • Borrower qualifying for the new loan under standard FHA underwriting requirements.
  •  Borrower must not have been convicted within the last 10 years of the following: (a) felony larceny, theft, fraud, or forgery; (b) money laundering; or (c) tax evasion in connection with a mortgage or real estate related transaction.
  • The loan to be refinanced must not be an FHA-insured loan.
  • The original lender must agree to write off at least 10 percent of the unpaid principal balance.
  • An existing second lien must be re-subordinated, or may be extinguished at the option of the first lien holder.
  • The new loan’s maximum loan-to-value ratio is 97.75% of the current property value and the maximum combined loan-to-value ratio is 115% of the current property value.

To participate in the refinance program, get in contact with a local FHA-approved lender to start the process.  You can use the following search engine to find one: http://www.hud.gov/ll/code/llslcrit.cfm.

The program expires on December 31, 2016.

Don’t Fall Prey to Foreclosure Rescue Scams
There are no fees for assistance with or information regarding the Making Home Affordable program. Do not pay fees to any person or organization that offers to provide counseling or modification for a fee. Some scammers are even convincing consumers to sign over the deed to their property. Work closely with your mortgage company and always check with them before signing away your home or directing your mortgage payments to any new location.

For further information on the Making Home Affordable program, visit www.makinghomeaffordable.gov. For further information on this and other elements of the financial stability program, visit the U.S. Department of the Treasury’s Office of Financial Stability.

Revised January 2016

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