The new , long awaited stimulus plan doesn't seem to have the "punch" as expected and they are still working some of the details out!! I know you may be a little bit overwhelmed, confused and frustrated right now in regards to the new government interventions in the mortgage and housing markets.  As a Certified Mortgage Planning Specialist^TM, I make it a priority to stay updated on developments in the mortgage markets that may impact my clients.  I have spent a lot of time reviewing the latest Making Home Affordable government program, and here are some of my observations.  If you think this information is useful, please pass it along to someone who may need it. 

The Making Home Affordable government program is divided into two parts:

• Modification Program
• Refinance Program

Part 1 - Modification Program

Believe it or not, the details of this program are still being worked out! Despite all the talk surrounding this program, it remains a 100% VOLUNTARY participation from your lender. Mortgage servicers (the companies that actually collect borrowers' mortgage payments) are not obligated by law to follow these rules and guidelines...YET.  Oddly enough, if a financial institution has already received monies from our government, they are NOT obligated to participate - which I personally think is ridiculous. However, if a financial institution receives new or more government funding in the FUTURE, they WILL be obligated to participate and help you.

The rules are still a bit sketchy and nobody really knows who will participate and how it will all work from a practical perspective.  Most of what you read and hear about in the media will most likely be speculation at this point. The program has three elements:

• The government is offering financial incentives to mortgage servicers who modify loans for borrowers.
• The government is offering financial reimbursement to investors if they allow servicers to modify loans and then take a hit on the borrower's re-default if the property declines in value after the loan modification
• The government is offering financial incentives to borrowers who modify their loans and make their new payments on time

ONLY primary residences are eligible - vacation homes and investment properties don't qualify for the program. Only homeowners who have experienced some type of financial hardship can qualify.  You will need to document that your financial situation is worse now than it was at the time that you originally got the loan.  Your income needs to have gone down, and/or your expenses need to have gone up.  Click on this link if you want to see if you qualify for at least the minimum requirements:

http://www.financialstability.gov/makinghomeaffordable/modification_eligibility.html

Remember, even if you do qualify under these minimum requirements, your servicer (the company where you send your payments) might not be participating in the program just yet. I am going to assume it will take them some time to set their guidelines on how they will proceed.

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Part 2 - Refinance Program

Here's how it works:

• You need to be current on your mortgage payments (no late payments in the last 12 months)
• Your mortgage balance cannot exceed 105% of the current value of your home (this will definitely be a problem for some homeowners seeking help in California, Nevada and Florida where the values have dropped significantly)
• Your mortgage needs to be owned or guaranteed by Fannie Mae or Freddie Mac

Based on current market conditions, this might make sense for you if:

• You have an adjustable rate, interest only, or balloon mortgage that you want to convert into a fixed rate; or,
• You have a fixed rate mortgage where the interest rate is greater than 6%.  I'll put you into my rate watch program and let you know when rates get to the point where you would benefit by refinancing.
  
  
  Other Recent Developments

There have been many other recent developments in the markets, as well as new government legislation. Here are just a few recent items that may impact you or someone you know:

• Home improvement tax credit - New incentives increase the size of the tax credits

• First-time home buyer tax credit of 10% of the purchase price (maximum of $8,000)
• Reverse mortgages for home purchase transactions (age 62 or older)
• Suspension of required minimum distributions for certain retirement accounts (age 70 ½ or older)

Tax Credits vs Tax Deduction
Tax credits can also provide significant savings to the homeowner. Whilst a tax deduction for home improvement can reduce the amount of income on which tax is payable, a tax credit directly reduces the tax itself. Tax credits are available for many types of home improvements. For example, installing insulation, adding energy-efficient windows, and some types of highly efficient equipment for cooling and heating, and solar water heating may all qualify for tax credits.

Let me know if you'd like to discuss any of these items in further detail.

Conclusion

I know that all the information you are hearing about the mortgage industry and government interventions can be distracting and confusing.  That's why I'm here for you!  As a Certified Mortgage Planning Specialist^TM, my role is to help you make sense of all the chaos and confusion in the market, so that you can make smarter mortgage and home buying choices.  Please send me an email or give me a call so that we can discuss how these and other recent developments may impact you and your situation!

 Regards,

Gerard Ladalardo, CMPS
www.caloanpros.com