How the Homeowner Affordability and Stability Plan Works
(Obama Plan)

The new Homeowner Affordability and Stability Plan, HAMP, launched by President Barack Obama is a program that will benefit between 4 and 9 millions of homeowners. The program target homeowners that have equity in their home and are current with their payments using the Home Affordable Refinance and helps the homeowners that are late on their payments or that are current but upside down ( owe more than what the house is worth) using the Home Affordable [ Loan ] Modification:

Home Affordable Loan Modification :

This section is what the Obama Program is mainly about. This plan is design to prevent millions of foreclosures. The program is what we were waiting for. The program will reach out homeowners that are at risk of foreclosure or already in Foreclosure procedings.

The government considers that you are at risk of foreclosure if your housing expenses ( principal, interest, home insurance, taxes, homeowner association) take more than 31% of your income.

A. Affordable Loan Modification

The Obama Home Affordability Program has design an "Affordable Loan Modification". If you qualify and get this kind of Loan Modification your mortgage payment will take a Maximum of 31% of your income. You will also get monetary incentives from the government ( toward the principal) and more.

The difference between this Loan Modification and a regular loan modification are:

* The goal of the Obama Loan Modification is to set your mortgage payment at 31% of your income. With a regular Loan Modification your negotiator try to get you the lowest interest rates and best terms and that can means more than 31% of your income if you have a house that is more than what you can afford.
* The Obama Loan Modification gives you an incentive if you are current with your payment. A regular modification does not.
* The Obama Loan Modification gives you a FHA backed loan
* The Obama Loan modification requires that you are in risk of facing foreclosure and expending more than 31% of your income to qualify. A regular loan modification does not.

What do I get when given a Loan Modification under the Obama Plan?

The opportunity of a Loan Modification that has the following characteristics:
1. And affordable mortgage payment : maximum 31% of your income
2. An incentive of $1,000 a year for 5 years to pay the principal of the loan for as long as you stay current with the payment

How the Loan Modification works?

The government will provide incentive to Financial Institutions so they offer this program. The process of the loan modification works like this:
• The lender will make the monthly payment up to 38% of the homeowner income if possible by lowering the interest rate or the principal
• The government will subsidize additional reductions in interest to lower the payment to 31% of the homeowner income
• The new lower monthly payment will be fixed for at least 5 years.

To incentivize the participation of lenders in this program the government is also offering them incentives for up to $6000 and also they will have an insurance fund for Home Price Decline.

When the cost of the loan modification “for the lender” is higher that the cost of sending the homeowner to foreclosure, the borrower is NOT eligible.

What is the benefit of getting a Loan Modification?

You can save your home from foreclosure if you are at risk of it.

Who Qualify for a Loan Modification under the Obama Plan ?

* Homeowners that are struggling to make their payments because they cannot afford to make the mortgage payment or their loan is bigger that the value of the house ( upside down or underwater).
* Only homeowners occupied homes qualify.
* If your family has a debt of more than 55% of their income (including mortgage, credit card, cars, etc) you will be required to agree to enter a Debt Counseling program in order to apply for a Loan Modification under the Obama Housing Program

For more information about the President Obama Loan Modification click here or use the navegation bar.

Do I need to have a Fannie Mae or Freddy Mac Loan to Qualify for a Loan Modification ?

NO. You only need to be struggling to keep current or be already behind on your mortgage payments. The government is providing all mortgage servicers with financial incentives to modify existing first mortgages. Contact your lender and ask them if they are working with the Obama Program. And even if they say that they don't find out if you can make a loan modification with them and lower your mortgage payment.

If you have a second mortgage. You are eligible

But only the first mortgage is elegible for Loan Modification under the Obama Program. New rules for the second mortgage have been created, please read at the bottom of the page

The program "Home Affordable Refinance expires on June 10, 2010. Your refinance transaction must be closed and funded on or before that date."

B. Clear and Consistent Guidelines for Loan Modifications

This apply for general loan modifications. On march 4 the government will publish standard guidelines for modification for federal agencies and private sector.
The idea is stimulate the issuing of loan modification for homeowners that are having problems making their mortgage payments even if they don't qualify to an Obama Loan Modification.

C. Requiring Lender that receive government money to Use the Guidance for Loan Modification:

This is probably the best part since it guarantees that the lender will implement this and the other hope now programs.

D. Allowing Judicial Modification of Home Mortgage during Bankruptcy:

Who will qualify?

Borrowers that have run out of options to save their home. You need to prove that you try loan modifications
Only Mortgages Under $417,000 or $625,000 for High Cost Areas

How it works?

The loans in excess of the current value of the house will become unsecure. The Judge then will create an affordable plan for the homeowner to continue making payments.

E. Strengthening FHA Programs:

Easing restrictions for the Hope Now Programs. The FHA will reduce fees paid by borrowers, increase the flexibility of lenders and allow higher debt rations.

Home Affordable Refinance:

The first part of the Obama Housing Plan is designed to help those homeowners that are current on their payments but that do not qualify for a regular refinance. This homeowners need to have some equity in their home or owe to the bank a maximum or 105% 125% of the actual appraised value of the house.

Who will Qualify for a Mortgage Refinance under the HAMP?

* Homeowners that have Fannie Mae or Freddie Mac Loan
* Homeowners that have equity in their homes or owe less than 105% 125% of their home [ actual ] market value [ Updated on July 10,09]

To check if your loan is from Freddie Mac click here or Fannie Mae, click here . Don't forget to come back here (www.stopFreclosure.com ) to read more about the Obama Plan

What will you get when you get an Affordable Refinance ?

The opportunity to refinance the mortgage and take advantage of the current super low interest rates and lower your monthly payment. Under regular circunstances you need a 20% equity in order to refinance your mortgage.

You can NOT take money out when you refinance using this program. If you have enough equity (20%) and need to get some cash you are better off doing a regular refinance. Shop around to find the lowest rate available and lowest costs.

How the Refinance Process works ?

If you have sufficient income to make the new payment and an acceptable mortgage payment history you will qualify for the refinance. You need to contact your lender and request a quote for a "Home Affordable Refinance". You can also shop around and compare the rates with other lenders. Since April 4 most of the major lenders in the country are approved to work with this program.

Do I Qualify if I am Late in my Mortgage Payment ?

No. If you are late, even just 30 days late during the past 12 months you do not qualify for an affordable refinance. You need to use the other part of the program and take an Affordable Loan Modification.

What are the Benefits of this Refinance?

You will reduce the Monthly Mortgage Payment and save thousands of dollars in interest during the life of the loan.

Example
Now: Mortgage Loan of $100,000 at 6.50% for 30 years the monthly payment for principal and interest $632
After: Mortgage Loan of $100,000 at 5.16% for 30 years the monthly payment for principal and interest $546
Savings: $86 a month or $1032 a year and with a very low interest.
If the interest were 7% the old payment would be $733. That is a saving of $187 a month!!

How do I apply to a Home Affordable Refinance?

Start by putting your financial house in order. Collect the paperwork you will need to refinance, including information detailing your gross monthly income; most recent income tax returns; information about any second mortgages; payments made on credit cards if you carry a balance; and payments on other loans, like auto or student loans. If you have lots of debt you will be required to do a debt consolidation it and to get debt counseling. If you want us to refer you to an agency that will help you to consolidate you debt click here and start that process now.

Now Second Mortgage Modifications Also

The second lien program is going to complement the Obama Home Affordable Modification Program. Now if you have more than one mortgage it will be easier for you to qualify for the Obama Plan created as part of the stimulus package.

This are the new rules that the lenders will follow:
• Interest Reduction to 1% for those loans that are amortized ( you pay principal and interst) and 2% for loans that are interest only
• Extension of the terms ( if your first mortgage is a 30 years one, now your second mortgage will be 30 years also)
• The lender can forgive part of the principal or forbear the same amount that the lender of the first mortgage forbade
• Adjustment of the interest after five years
• The government also will pay an incentive to the lenders that participate in the program

FREQUENTLY ASK QUESTIONS ABOUT THE OBAMA LOAN MODIFICATION PROGRAM HERE