Qualifying For The New Foreclosure Relief Program

Last Friday the Obama administration announced their latest plans for helping consumers who are currently in foreclosure or are moving slowly toward the foreclosure process.  The following information comes from administration statements and analysis of those plans from Goldman Sachs in New York.

Help for the unemployed-  Jobless mortgage holders can receive a three month temporary forbearance on their mortgage loan. Loan servicers participating in the Making Home Affordable Program are required to offer assistance to all jobless borrowers who meet eligibility criteria.

Meeting eligibility criteria- You must provide proof of unemployment insurance benefits.   The home must be your primary residence and the loan origination dated prior to January 1, 2009.  The current loan balance must be less than $729,750.  The borrower must be less than 90 days delinquent with payments on the current mortgage loan.

Qualifying for FHA refinance loans- The borrower must be current with their existing mortgage payments, home is current primary residence and a FICO credit score of  > 500.  The monthly payment for the new loan must remain below 31%  of borrowers income. Other rules which apply to all FHA loans can make it difficult for most to qualify for FHA refinance.

Loan servicers participating in HAMP will be ‘required to consider’ principal writedowns if the loan-to-value (LTV) ratio is greater than 115 percent, this program will allow some homeowners with negative equity to gain a reduction in principal balance in stages over a three year period, if they remain current on their loan payments.

In an effort to encourage lenders to choose loan-balance reduction, the Government will offer 10 cents per dollar of principal written down above 140% loan-to-value ratio (LTV), 15 cents between that level and 115%  loan-to-value ratio (LTV) and 21 cents for loan-to-value ratio (LTV) reductions below that.  According to a Goldman Sachs report,  second liens that are more than six months delinquent will receive a standard 6% incentive.   The newest relief effort from this administration is still a work in progress.  No dates have been set for specific deadlines for servicers, some parts of this newest effort will be operational within the next few weeks while all other elements (some of which were not included here) will go into effect by the fall of this year.

Related posts:

  1. Permanent Loan Modifications Difficult To Achieve
  2. Lenders Resist Making Home Affordable
  3. Report: HAMP Program Only Making A Dent In Foreclosure Crisis
  4. FTC Proposes Up-Front Fee Ban for Mortgage Modifications
  5. Foreclosure Prevention Program, Fixer Upper Or Turn Key Ready?

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