Ed's Blog

As you may know, the Housing Affordability and Stabilization Plan (aka “Making Home Affordable”) goes into effect on April 4, 2009. This program is designed to help homeowners who need to refinance their mortgage, but don’t have 20% equity. It is also designed to help those that (due to financial hardship) are finding that keeping up with their mortgage is nearly impossible. Although the program is complex, I’ve broken it down into the basics.

If you’re struggling to refinance due to a lack of equity:

· In order to refinance your current mortgage under this program, the loan must be for your primary residence (no second, vacation or investment properties apply).

· Your current loan must be through Fannie Mae or Freddie Mac. Loans owned by any other servicers are not eligible!

· You will need to qualify in the same way you would qualify for any refinance (proof of assets, income, and other debts).

· You will be required to purchase PMI (Private Mortgage Insurance) if you do not already have it.

· Limits are available up to $729,750 in high cost areas like California.

· You may be eligible for help in refinancing up to 105% of your mortgage

If you’re struggling to make your payments and you need a loan modification:

· This too must be your primary residence.

· You must be in danger of defaulting, or already in default (meaning you’ve missed payments).

· Your mortgage payment may be reduced to no more than 31% of your gross income.

What Remains To Be Seen:

· We don’t have a final list of which banks will be participating in these programs. By law, if a bank receives government bailout money, they are required to participate. However, even if they don’t receive money, they may still opt to participate.

· Second mortgages will need to take a backseat, and the servicer of that loan will need to agree to remain in the “secondary position,” to your new loan. We’re hopeful that most will agree to do this.

· Fees have yet to be determined. Again, we’re hoping that fees accompanying these modifications and refinances will remain low, but we don’t have definitive answers just yet.

With such a broad reaching plan, there will undoubtedly be changes to these programs as we move forward with “Making Home Affordable.” Rest assured though, that the team at Smith Craine Finance is keeping abreast of all changes, and is here to offer you advice and assistance with refinancing, or loan modifications.

Please don’t hesitate to contact us today to learn more, and to start working towards lowering your monthly mortgage payments. Interest rates remain at all time lows, and credit is once again beginning to flow. We can always be reached at 415-406-2330.