Obama Mortgage Rescue Plan: Housing Package and Home Owner Rescue Plan

You don’t have to give up the fight and lose your home-find out if you may qualify for Obama mortgage rescue plan . This program is designed to stop foreclosure and keep families in their homes with a loan modification and low affordable mortgage payments. Even if you have been turned down before, you are allowed to apply for this government program again.

If yours is not a government-backed loan, but you are paying more than 31% of your gross monthly income, you may also qualify. One of the ideas of this rescue plan is to also help people lock in the lower rates offered today even if they do not have the 20% equity that was previously required. However, the Treasury will not pay subsidies to lower rates below 2%. The modification plan states that a servicer is to reduce the interest rate so that the homeowner’s monthly obligation does not surpass 38% of the borrower’s pre-tax income.

If there are additional mortgages (Second Mortgage, Home Equity Line of Credit, or other liens), the other lien holders must be willing to subordinate their liens in writing to the new first mortgage. Subordinate simply means that the first mortgage will retain it’s superior lien position. It is OK if the total owed exceeds 105% of current value, as long as the first mortgage refinance does not exceed the 105% rule. The program officially started 3/4/2009. Now comes the HAM (Home Affordable Modification): To be eligible, the Lender must be willing to participate. Investor/Lender & Servicer participation is voluntary on their part. The intention of the program is to avoid foreclosures whenever possible. Each case is evaluated separately and borrowers must prove that they can afford the modified payment. There must be a steady source of income to be eligible. There must be a documented financial hardship to qualify. The current monthly PITI (Principle, Interest, Taxes, & Insurance Total) must exceed 31% of the borrower(s) gross monthly income. No jokes allowed about the “PITI” acronym.

The borrowers do not need to be current on the monthly payments. Again, each situation is unique and will be evaluated on a case-by-case basis. The goal of the plan is to reduce the total housing PITI payment for all mortgages to no more that 31% of gross income. This includes any second mortgages or HELOCS who must be willing to participate and subordinate their liens to the new modified mortgage.
The subject first mortgage must be for the Borrower’s primary residence. Second homes and investment properties are not eligible. The subject mortgage must have been made before 1/1/2009 and it cannot exceed $729,750. I am sure there is a reason that they used $729,750 as the maximum, but I cannot find any information about how the government arrived at this amount. The payment reduction will be achieved by reducing the interest rate, extending the term of the loan, or by a principle reduction (last resort).

Remember, this is voluntary on the lender/investor and/or servicer’s part.
Modifications are for a 90 day “trial” period. If the borrower(s) honor all of the terms during the 90 day trial, then the modification will be extended for a term of no less than 5 years. Beginning in year 6, the interest rate can be increased by no more than 1% per year until the note rate reaches the “Freddie Mac Primary Mortgage Market Survey Rate” on the date that the modification is executed.

Learn more about Obama Mortgage Relief Plan Qualifications.