By providing mortgage providers with financial incentives to modify existing first mortgages, the Treasury hopes to help as many as 3 to 4 million homeowners avoid foreclosure regardless of who owns or services the mortgage.
The hope is that more homeowners will now be able to refinance mortgage loans that feature better terms. This is especially important for those homeowners who took out adjustable-rate mortgage loans during the housing boom. Here are some frequently asked questions and answers regarding the program.
Who is Eligible to Apply for Refinancing?
Mortgage holders who are not behind in payments on their mortgages but who have been unable to take advantage of low interest rates because their homes have decreased in value may have the opportunity to refinance their loans through the Home Affordable Refinance Program.
Will Refinancing Reduce the Amount Owed on a Loan?
The Home Affordable Refinance will not reduce the principal amount owed to a mortgage company but refinancing should save money by reducing the amount of interest payable over the term of the loan.
How Long Will the Home Affordable Refinance be Available?
Refinance and modification applications must be received on or before June 2010 when the program expires.
Will Refinancing Improve the Long Term Affordability of a Loan?
The program will not necessarily help everyone. A mortgage lender will give a GFE (Good Faith Estimate) that will include the new interest rate, mortgage payment, amount payable over the life of the loan and closing fees. Compare this to the current loan terms and analyze whether or not one is getting a good deal. Risk can be eliminated from a current situation by refinancing an ARM loan or Interest Only loan into a fixed rate mortgage, thereby making the mortgage situation one finds oneself in more stable.
Can Cash be Obtained to Consolidate Debt?
No, however, if the loan is owned or securitized by Fannie Mae (the Federal National Mortgage Association) one might be eligible to finance all closing costs and obtain a small amount of cash (2% of the mortgage amount not to exceed $2,000) through the refinance if there is sufficient equity on the property.
How to Apply for Home Affordable Refinance?
Call a mortgage servicer and ask about the application process for the Home Affordable Refinance Program. Lenders are implementing the program now as it may take time before they are ready to process all applications.
Will I Qualify for a Home Affordable Refinance if Mortgage Payments are in Arrears?
No. An application will not be considered for qualification if the mortgage payments have been 30 days overdue more than once during the past 12 months. One may be considered for a Home Affordable Modification if this is the case.
Sources:
Government's Home Affordability Program- Refinance and Modification Eligibility
Fleur Hupston - Fleur Hupston is a professional freelance writer based in Botswana, Southern Africa. From this unique perspective, she writes travel ...
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