Federal mortgage relief plan

March 6, 2009 11:47:24 AM PST
This past Wednesday, President Obama released details on a plan for helping some American homeowners refinance their mortgages or avert foreclosure. Although the plan is not designed to save every borrower, it will provide millions of financially strapped families with a second chance to rebuild. Joan Jensen, president and CEO of The Central Credit Union of Illinois sorts through the plan to determine who qualifies for help.

What's the plan

  • There are two new programs that will provide relief to many homeowners.
  • One focuses on refinancing the loan and the second focuses on loan modification program
Loan Refinancing Program Qualifications
  • Refinanced home is the primary residence
  • Can finance only up to 105 percent of current market value
  • Mortgage is owned or guaranteed by Fannie Mae or Feddie Mac
  • The mortgage is conforming (that is, less than $417,000 if in Chicago area)
  • Mortgage payments are current
  • Enables some qualified borrowers to refinance at lower interest rates even if their property is worth less than their mortgage
Loan Modification Program Qualifications
  • Home is the primary residence
  • Mortgage totals less than $729,750 if it's a single family home
  • Loan originated prior to January 1, 2009
  • Borrower is at risk of defaulting on mortgage, may be delinquent
  • Loan may only be modified and adjusted one time under this program
  • Creates a repayment plan to reduce payment to 31% of gross income
  • Changes the payment terms of the mortgage
  • May modify the interest rate as low as 2 percent, increase the term up to 40 years, and/or reduce the principal
  • Reduced payment terms effective for 5 years
  • After 5 years, interest may increase a maximum of 1 percent a year
  • Borrowers who pay on time are rewarded with a $1,000 yearly reduction in principal for up to 5 years
Action Plan
  • Get the details to see if you are qualified to participate
  • Go to HUD.gov and follow the links to FinancialStability.gov
  • Gather the documents and information listed on the financial stability website
  • For additional guidance, work with a HUD-approved housing counselor. Do not pay a third part for help.