Obama's Foreclosure Plan

With the Obama Foreclosure Prevention Plan ready to come into effect on March 4th, the one main question we are patiently awaiting an answer to:  Will the Plan Save my Home?

The short answer is YES, but as with everything… its much more detailed than that! Lets review the Obama Foreclosure Plan from end to end, so you can decide.

Does My Loan have to be with Fannie Mae or Freddie Mac?

At this point, Yes. However, President Obama is encouraging others lenders and guarantors to step up and negotiate loans with their customers, you and I!

How is this Going to Help Me?

Assume for a moment you bought your home for $200,000 2 years ago, and you still owe $190,000 in principal. Lets also assume that the housing market in your area has suffered due to the economy, and under current market conditions, your home is only valued at $180,000. That means you are upside down on your loan, and owe more than its worth, also known as Negative Equity. At this point, no bank would allow you to refinance under the past practices, since you would be an instant risk, regardless of your credit score.

Under the Obama Foreclosure Plan, banks will allow you to finance up to 105% of your homes market value, as well as getting a reduced interest rate to make the payments more manageable.

What if I have a First and Second Mortgage?

As long as your primary or first mortgage does not exceed 105% of your homes market value, you still qualify.

Will My House Payments go Down?

This really depends on many factors, but, if you are in a situation with a variable rate or interest only loan on your home, the Foreclosure Plan could reduce your monthly payments significantly! As March 4th comes to us and you speak with your lender, you first need to find out if the new rate will be lower than your current rate. If so, then you will definitely reduce your monthly expenses.

On the other hand, if you already have a low fixed rate, there may be no benefit in refinancing your current loan!

Will Refinancing Reduce the Principal on my Home Loan?

No. The Foreclosure plan is designed to get creditworthy homeowners into loans with fixed rates, making them easier to manage in their monthly budget.  What the new loans will do however, is lower your monthly payments, thus making the risk of foreclosure much lower.

Do I need to be Behind on My Payments Now?

No. The Obama Foreclosure plan is designed to help anyone, regardless of whether they are in trouble now, or just heading for financial trouble in the near future.

How Do I Know if I Qualify?

There are very few requirements for the Home Loan Modification Program…

1. You MUST Live in the home and it must be your Primary Residence. In other words, they will not refinance investment property.
2. Your monthly payment on your home loan is more than 31% of your monthly income!
3. The amount of your loan does not exceed current Fannie and Freddie maximum loan amounts. (Lookup limits in your area)

Will the Foreclosure Plan help Everybody?

No. Unfortunately, there are far too many in need and the plan is designed to help approximately 9 Million homeowners. There will still be a few that fall through the cracks.

How Can I Get Ready to Qualify?

At this point, the methodology is being put in place to handle the large number of requests expected to come in. In the meantime, you can get ahead of the crowd by preparing your documents for your lender.

• Recent Paystubs and Income information for your household.
• 2008 and 2009 Income tax Returns
• If you have a second mortgage, have all documentation
• All credit card statements as well as monthly payments and balance information.
• Information on all car loans and student loans you are responsible for.

I’m Ready – Whats Next?

Although the plan does not take any action until March 4th, you are encouraged to get in touch with your lender as soon as possible, to start gathering any information they may need for the Obama Foreclosure Plan.

More information can be found on the WhiteHouse Blog