Tax Credit Gov
March 2nd, 2008
The Obama administration’s “Making Home Affordable” Program has been in the headlines since its announcement in early March. Attending to both refinancing and loan modifications, the program gives struggling homeowners additional options as they decide on the best options to lower their mortgage obligations, catch up on payments, and stay out of foreclosure. The program has also raised a lot of questions, so here are some of the more frequent ones being asked around the internet.
Q) Which lenders are offering the program?
A) The program was implemented first at FNMA and FHLMC and is expected to roll out to lenders across the country over the next several months. Lenders participation is voluntary unless they accepted FSA/TARP (bank bailout) funds. Those lenders will be required to offer refi’s and loan modifications under the program’s guidelines.
Q) Is there a limit on the size of the mortgage that can either be refinanced or modified?
A) A mortgage must be $797,000 or less to be eligible.
Q) Will a loan modification or refinance hurt my credit score?
A) Credit scores under the program won’t be affected as the homeowner’s mortgage is essentially being re-written. However, circumstances related to either refinancing or modifying could have an effect. For instance, missed payments leading to a modification would definitely hurt a credit score. On the upside, lower mortgage payments could give a homeowner the opportunity to pay down other debts, resulting in a better credit score over time.
Q) Is it possible that my mortgage payments could actually go up?
A) It’s possible. Homeowners still in the “teaser rate” phase of their mortgage are one group that could see an increase. The program’s base rate of 2% and caps on the ratio of mortgage payments to income should mitigate the increase. Another group of homeowners that would be very likely to see a payment increase is the one with negative amortization loans. Re-working those mortgages into amortizing loans could raise payments significantly. Despite the potential of increased payment obligations under either option, it could still make sense to refi or modify if the change results in a “lesser of two evils” scenario where payments go up but as much as if the homeowner does nothing. Payments can be gauged at the government’s web site at http://www.makinghomeaffordable.gov
Q) Does the program expire?
A) Yes. The Making Home Affordable program expires on June 10, 2010, which gives homeowners, especially those mentioned in the situations in the previous question, some time to sit on their lower payment schedule before adjusting upward.
Q) Can I do a refinance or loan modification on my own?
A) A qualified yes. Either can be done as a “do it yourself” but there are many issues to consider. One issue is simply the time involved in getting the project completed. Lender’s hours of operation are typically very similar to those of people working a regular 9 to 5 schedule. If a homeowner can’t put time in to the project during work hours it will require time over lunch and after work, if that’s possible at all. A do it yourselfer should allow for plenty of time to learn about each process, phone/hold time with the lender, and for paperwork. The second issue is that a refinance or loan modification is still a negotiation. Hiring an attorney to wring out the best terms possible could make the fees involved a very worthwhile investment.
Administration in ‘preventive role’
BEDFORD — Citing what she called “an era of taxpayer protection,” Lt. Gov. Becky Skillman said writing property tax caps into the Indiana Constitution is the admi …
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