Will I Qualify for Refinancing Under Obama Housing Plan

With all of the talk about President Obama’s Homeowner Affordability and Stability Plan, have you wondered if you could quailify for refinancing?Following are the main provisions for refinancing:

1. Have a conforming loan backed by Fannie Mae or Freddie Mac. Approximately 60% of single-family “conforming” loans are backed by these two programs. These are the companies that buy the loans from your bank/servicer and then sell them to Wall Street. A conforming loan is one under $417,000 in many areas — or up to $729,500 in certain high-cost areas. Call your lender to find out if you qualify under Obama’s housing plan.

2. Your Loan to Value ratio can now be as high as 105%. Under current conditions you cannot refinance mortgages where the loan-to-value (LTV) ratio exceeds 80 percent without some form of credit insurance. Under the Obama housing plan, the LTV has been raised to 105%, which means you qualify even if you owe between 80-105% of your mortgage. However, if you are severely “underwater” and owe more than 105% of your home’s value you will not qualify and may have to wait for mortgage relief via other lender driven provisions under the housing plan.

3. Allows borrowers with less than 20% equity in their homes to refinance to the current prevailing rate. However they must meet the above LTV criteria.

4. Timeframe Eligibilty. Only loans that originated on or before January 1, 2009 are eligible for this program. The modification program will be in effect until the end of 2012, but loans can only be adjusted once.

5. Bonus Payments. Borrowers who keep up with their new payments will receive up to $1,000 a year in principal reduction, for up to five years.

6. Modification Threshold. Loan servicers will follow a specified sequence of steps in order to reduce the monthly payment (with government subsidies) to no more than 31% of gross monthly income (DTI). More than 25% of home owners will qualify under the new refinancing criteria, but there are somerestrictions to prevent abuse of these new provisions.

If you think you will qualify you should start getting ready to begin the refinancing process as soon as possible. Borrowers can now contact their loan servicers to see whether they are eligible for assistance.

For more information about President Obama’s new plan go toObama’s Mortgage Rescue Plan or How an FHA mortgage can help a first time buyer.

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