The Making Homes Affordable Program

One of the things you’ll find when doing the Making Homes Affordable plan for homeowners is that you’ll get a letter back from the bank stating how much they will want the homeowner to pay on a “trial” basis. Sometimes the lender returns a three month “Forbearance Agreement”, while on other occasions it’s just called a “trial” period. Recently, for example, a client received a letter from his lender stating that the buyer was to make a payment each month in the form of certified funds in the amount of $1,045 per month – which is about half of what he used to be paying. People will often ask, “How do banks come up with this payment amount?” The answer is simple. Under the Making Homes Affordable Plan, the lender will look to see that the payment falls into a 38% total debt ratio. From here the Making Homes Affordable Plan may reduce the debt even further, depending upon other factors including the number of dependents, income and the buyer’s other debts. Example: In order to qualify for a mortgage for which the lender requires a debt-to-income ratio of 28/36: • Yearly Gross Income = $53,000 / Divided by 12 = $4,416 per month income. o $4,416 Monthly Income x .28 = $1,236 allowed for housing expense. o $4,416 Monthly Income x .38 = $1,678 allowed for housing expense plus recurring debt. o $4,416 Monthly Income x .31 =$1,369 allowed under the Making Homes Affordable Program o So the Making Homes Affordable Program may reduce the homeowner’s debt by about $309 per month