In an article the week before last, the Associated Press answered some commonly-asked questions about the governmnet’s Making Home Affordable program, which aims to help homeowners stay in their homes through refinancing and mortgage modification aid. For more information, or to see if you qualify, visit www.makinghomeaffordable.gov.
Q: How will my credit profile be affected?
“Refinancing generally doesn't affect your score since it's simply a rewritten mortgage. This is especially true of refinancing under the federal program, since one of the terms of eligibility is that homeowners can't have missed a payment in the past year.”
“It's not yet clear what impact a federal loan modification - an adjustment to terms of an existing mortgage, rather than a new one - will have on credit profiles. Regulators haven't yet determined how the loan modifications will be reported, if at all.”
“If you're applying for a loan modification under Making Home Affordable, it means you've already missed payments and hurt your credit profile. A loan modification should improve your credit profile in the long-run since the idea is to get you on track for meeting payments.”
Q: Is it possible my payments will be higher?
“If you're still paying a low, introductory rate, it's possible your monthly mortgage payment will increase slightly under the federal refinancing program. But the idea is to avoid the big interest rate spikes that typically come with adjustable-rate mortgages.”
“After applying for the Making Home Affordable program, your lender should give you a "good faith estimate" that includes your new interest rate, mortgage payment and the total cost of the loan. Compare the numbers with your current loan; you might decide that refinancing isn't an improvement.”
“You can also check out the payment reduction estimator on the government's Web site at www.makinghomeaffordable.gov.”
Sounds great, right? Yet help -- at least under the Making Home Affordable refinancing program -- may remain elusive for Valley homeowners. The program was initially designed to allow even homeowners who are “underwater” -- who owe more than their homes are worth -- to refinance. But a cap of 105% was later put on refinanced mortgages under the program -- meaning that homeowners cannot qualify if they owe more than 105% of their home’s value.
Even if you put 20% down and never tapped your home for equity, if you bought at the peak and live in one of the Valley areas where prices have fallen 30% or more, you could owe more than 105% of your home’s value -- which would exempt you from the government’s loan refinancing program.
Homeowners in the Valley may have more success with the government’s loan modification program, which aims to help qualified homeowners reduce their mortgage payment to no more than 31% of their income. According to the Republic, “During the past few weeks, Valley housing advocates and mortgage brokers began hearing loan-modification success stories.”
What do you think? Have you tried to refinance or modify your mortgage under the Making Home Affordable program? Click on the “Comments” link to join the discussion!
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