Questions and Answers to the Obama $75 Billion Plan to Aid 9 Million borrowers suffering from falling home prices & unaffordable payments
Borrowers Who Are Current on Their Mortgage:
Q: I owe more than my property is worth, do I still qualify to
refinance under the Homeowner Affordability and Stability Plan?
A: Eligible loans will now include those where the new first mortgage (including any refinancing costs) will not exceed 105% of the current market value of the property. For example, if your property is worth $200,000 but you owe $210,000 or less you may qualify. The current value of your property will be determined after you apply to refinance.
Q: Will refinancing reduce the amount that I owe on my loan?
A: No. The objective of the Homeowner Affordability and Stability Plan is to help borrowers refinance into safer, more affordable fixed rate loans. Refinancing will not reduce the amount you owe to the first mortgage holder or any other debt you owe. However, by reducing the interest rate, refinancing should save you money by reducing the amount of interest that you repay over the life of the loan.
Q: When can I apply?
A: Mortgage lenders will begin accepting applications after the details are announced on March 4, 2009.
Q: What are the interest rate and other terms of this refinance offer?
A: The objective of the Homeowner Affordability and Stability Plan is to provide borrowers with a safe loan program with a fixed, affordable payment. All loans refinanced under the plan will have a 30 or 15 year term with a fixed interest rate. The rate will be based on market rates in effect at the time of the
refinance and any associated points and fees quoted by the lender. Interest rates may vary across
lenders and over time as market rates adjust. The refinanced loans will have no prepayment penalties or balloon notes.
Borrowers Who Are at Risk of Foreclosure:
Q: How do I know if I qualify for a payment reduction under the Homeowner Affordability and
Stability Plan?
A: In general, you may qualify for a mortgage modification if (a) you occupy your house as your primary residence; (b) your monthly mortgage payment is greater than 31% of your monthly gross income; and (c) your loan is not large enough to exceed current Fannie Mae and Freddie Mac loan limits. Final
eligibility will be determined by your mortgage lender based on your financial situation and detailed
guidelines that will be available on March 4, 2009.
Q: Do I need to be behind on my mortgage payments to be eligible for a modification?
A: No. Borrowers who are struggling to stay current on their mortgage payments may be eligible if their income is not sufficient to continue to make their mortgage payments and they are at risk of imminent default. This may be due to several factors, such as a loss of income, a significant increase in expenses, or an interest rate that will reset to an unaffordable level.
Q: I heard the government was providing a financial incentive to borrowers. Is that true?
A: Yes. To encourage borrowers who work hard to retain homeownership, the Homeowner Affordability and Stability Plan provides incentive payments as a borrower makes timely payments on the modified loan. The incentive will accrue on a monthly basis and will be applied directly to reduce your mortgage debt. Borrowers who pay on time for five years can have up to $5,000 applied to reduce their debt by the end of that period.
Q: My loan is scheduled for foreclosure soon. What should I do?
A: Contact your mortgage servicer or credit counselor. Many mortgage lenders have expressed their intention to postpone foreclosure sales on all mortgages that may qualify for the modification in order to allow sufficient time to evaluate the borrower’s eligibility. We support this effort.
Q: How much will a modification cost me?
A: There is no cost to borrowers for a modification under the Homeowner Affordability and Stability Plan. If you wish to get assistance from a HUD-approved housing counseling agency or are referred to a
counselor as a condition of the modification, you will not be charged a fee. Borrowers should beware of any organization that attempts to charge a fee for housing counseling or modification of a delinquent loan, especially if they require a fee in advance.
Tuesday, February 24, 2009
Tuesday, February 17, 2009
Homeowner Help?......Finally
I haven't posted a commentary in quite some time. Finally I feel I've got something to say!! It's been a difficult 12 months, but help appears to be on the horizon. I will be truthful, I was not one for bailouts....any of them!!! In my heart, I still feel that we as homeowners have got to take responsibility.(i don't mean those of us who have always acted responsibly, pay our bills on time, live within our means etc.) There's a reason why everyone isn't able to own a home. It takes sacrifice, perserverance, determination and timing to make real estate ownership a reality. Now don't get me wrong, there are definitely individuals who were taken advantage of. But folks, if it sounds to good to be true, guess what......IT IS!!!!
As a mortgage broker, our industry is taking the brunt of this catastrophe. And although there were a few who acted criminally, the banks, wall street and now out of business mortgage bankers are really the true culprits. I say all this to say that I have resided to the fact that it appears there is no other way out for us except to bail out those who are upside down and those whose mortgage payments have skyrocketed. I don't believe in rewarding irresponsible behavior but I've finally come to except it's no other way. Let's just get it on and over with and begin to heal our country.
This is a painful lesson for all of us. We are back to the days of working to save for a down payment, having and maintaining good credit and demonstrating a stable work history. (this one could be the toughest)..... There are good reasons why everyone can't/doesn't own real estate.
As a mortgage broker, our industry is taking the brunt of this catastrophe. And although there were a few who acted criminally, the banks, wall street and now out of business mortgage bankers are really the true culprits. I say all this to say that I have resided to the fact that it appears there is no other way out for us except to bail out those who are upside down and those whose mortgage payments have skyrocketed. I don't believe in rewarding irresponsible behavior but I've finally come to except it's no other way. Let's just get it on and over with and begin to heal our country.
This is a painful lesson for all of us. We are back to the days of working to save for a down payment, having and maintaining good credit and demonstrating a stable work history. (this one could be the toughest)..... There are good reasons why everyone can't/doesn't own real estate.
Thursday, February 12, 2009
Home Buyer Tax Credit Help or Hindrance
The Senate measure offers the credit to anyone buying a primary residence. But buyers must earn enough to have $7,500 in income taxes -- $81,900 per year for a family of four -- to get the full benefit.
By Ben Meyerson and Sarah Gantz 7:03 AM PST, February 9, 2009
Reporting from Washington --
The Senate's proposed $15,000 tax credit for home buyers would boost the ailing housing market but do little to help low-income people who need it most, experts say.
The measure, which is part of the $827-billion economic stimulus plan that the Senate is due to vote on Tuesday, would offer the credit to anyone who buys a primary residence. But to take full advantage of the credit, buyers would have to earn enough to use it and spend at least $150,000 on a home.
As many as 1 million home sales could result from the tax credit, according to Mary Trupo of the National Assn. of Realtors. "By increasing demand and decreasing inventory, it'll help to stabilize home values and result in fewer foreclosures," she said.
But low-income people will not benefit, said Linda Couch, deputy director of the National Low Income Housing Coalition. "The bill is focusing a lot more of its resources on higher-income households and home ownership than it is on the lowest-income people and people really teetering on the edge of homelessness."
Since the money comes as a deductible tax credit spread over two years, home buyers must earn enough to have $7,500 in income taxes -- $81,900 per year for a family of four to get the full benefit, according to the housing coalition.
But if the home costs less than $150,000, the deduction is only worth 10% of the house's value, meaning that those buying the cheapest homes wouldn't receive the full benefit.
Alma Jill Dizon, a Realtor from Riverside, agreed that there wasn't much in the measure for low-income Americans. "From what I can tell, it's really going to benefit people who already have enough salary" to buy a house, said Dizon, who said she sells homes from $150,000 to more than $1 million.
Dizon said her market is dominated by older, three-bedroom, one-bath homes in need of repair. Those houses sell for about $150,000 to first-time buyers who don't have the savings to make a deposit on something larger.
"You have to owe enough in taxes in the first place" to take advantage of the rebate, Dizon said. "That's why it benefits people who earn more money and earn more on taxes."
But the tax credit could greatly help the housing market by making the more expensive homes in the area more appealing, she said. What once were multimillion-dollar homes in Riverside now are priced between $500,000 and $1 million, she said. With a tax credit, those homes -- many of which are on the brink of foreclosure -- are beginning to look more attractive to buyers.
"This isn't actually going to get a lot of people buying houses at the very bottom," Dizon said. "Who is going to start buying more houses is people in the middle and upper range. That can be good as far as staving off more trouble in those ranges, in those better neighborhoods."
But halfway across the country, in Cleveland, another Realtor, Ralph A. Vaneck could use a hand selling nicer homes. There, the median income is half of Riverside's -- $27,007 compared with $54,099.
"The non-foreclosure market is where the major help is needed -- that's the dead part of the market," said Vaneck, president of Westway Realty. Those homes are priced between $95,000 and $120,000.
People are more interested in purchasing foreclosed homes because they can get them for as little as $35,000, he said; 85% of his business comes from selling foreclosed homes.
The Senate measure expands an incentive approved last year -- a $7,500 credit for first-time home buyers that had to be repaid later. The House's version of the economic stimulus package renewed last year's provision and eliminated the payback requirement.
But the Senate bill goes further, making the credit available to anyone buying their primary residence, and doubling the eligible amount to $15,000.
Once the Senate passes its version of the stimulus package, a conference committee will resolve differences between it and the House bill. Then both houses will be asked to vote on the compromise.
Trupo of the National Assn. of Realtors sees hope in whatever the housing credit turns out to be, although Realtors favor the higher amount.
"If it's $15,000, $7,500 or somewhere in the middle, there is going to be a significant impact to the market," she said.
Helping the housing market get back on its feet is in the interest of everyone, said Jerry Howard, president and chief executive of the National Assn. of Home Builders.
"Until you stabilize house values, you won't be able to stabilize -- let alone stimulate -- the economy," he said. "This is the kind of stimulus that ought to get buyers off the sidelines and into the housing market."
bmeyerson@tribune.com
sgantz@tribune.com
By Ben Meyerson and Sarah Gantz 7:03 AM PST, February 9, 2009
Reporting from Washington --
The Senate's proposed $15,000 tax credit for home buyers would boost the ailing housing market but do little to help low-income people who need it most, experts say.
The measure, which is part of the $827-billion economic stimulus plan that the Senate is due to vote on Tuesday, would offer the credit to anyone who buys a primary residence. But to take full advantage of the credit, buyers would have to earn enough to use it and spend at least $150,000 on a home.
As many as 1 million home sales could result from the tax credit, according to Mary Trupo of the National Assn. of Realtors. "By increasing demand and decreasing inventory, it'll help to stabilize home values and result in fewer foreclosures," she said.
But low-income people will not benefit, said Linda Couch, deputy director of the National Low Income Housing Coalition. "The bill is focusing a lot more of its resources on higher-income households and home ownership than it is on the lowest-income people and people really teetering on the edge of homelessness."
Since the money comes as a deductible tax credit spread over two years, home buyers must earn enough to have $7,500 in income taxes -- $81,900 per year for a family of four to get the full benefit, according to the housing coalition.
But if the home costs less than $150,000, the deduction is only worth 10% of the house's value, meaning that those buying the cheapest homes wouldn't receive the full benefit.
Alma Jill Dizon, a Realtor from Riverside, agreed that there wasn't much in the measure for low-income Americans. "From what I can tell, it's really going to benefit people who already have enough salary" to buy a house, said Dizon, who said she sells homes from $150,000 to more than $1 million.
Dizon said her market is dominated by older, three-bedroom, one-bath homes in need of repair. Those houses sell for about $150,000 to first-time buyers who don't have the savings to make a deposit on something larger.
"You have to owe enough in taxes in the first place" to take advantage of the rebate, Dizon said. "That's why it benefits people who earn more money and earn more on taxes."
But the tax credit could greatly help the housing market by making the more expensive homes in the area more appealing, she said. What once were multimillion-dollar homes in Riverside now are priced between $500,000 and $1 million, she said. With a tax credit, those homes -- many of which are on the brink of foreclosure -- are beginning to look more attractive to buyers.
"This isn't actually going to get a lot of people buying houses at the very bottom," Dizon said. "Who is going to start buying more houses is people in the middle and upper range. That can be good as far as staving off more trouble in those ranges, in those better neighborhoods."
But halfway across the country, in Cleveland, another Realtor, Ralph A. Vaneck could use a hand selling nicer homes. There, the median income is half of Riverside's -- $27,007 compared with $54,099.
"The non-foreclosure market is where the major help is needed -- that's the dead part of the market," said Vaneck, president of Westway Realty. Those homes are priced between $95,000 and $120,000.
People are more interested in purchasing foreclosed homes because they can get them for as little as $35,000, he said; 85% of his business comes from selling foreclosed homes.
The Senate measure expands an incentive approved last year -- a $7,500 credit for first-time home buyers that had to be repaid later. The House's version of the economic stimulus package renewed last year's provision and eliminated the payback requirement.
But the Senate bill goes further, making the credit available to anyone buying their primary residence, and doubling the eligible amount to $15,000.
Once the Senate passes its version of the stimulus package, a conference committee will resolve differences between it and the House bill. Then both houses will be asked to vote on the compromise.
Trupo of the National Assn. of Realtors sees hope in whatever the housing credit turns out to be, although Realtors favor the higher amount.
"If it's $15,000, $7,500 or somewhere in the middle, there is going to be a significant impact to the market," she said.
Helping the housing market get back on its feet is in the interest of everyone, said Jerry Howard, president and chief executive of the National Assn. of Home Builders.
"Until you stabilize house values, you won't be able to stabilize -- let alone stimulate -- the economy," he said. "This is the kind of stimulus that ought to get buyers off the sidelines and into the housing market."
bmeyerson@tribune.com
sgantz@tribune.com
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