Government Mortgage Assistance Programs in 2009 – A Homeowner’s Guide
By Brandon Cornett | 3/18/09
© 2011, All rights reserved
Thus far, 2009 has been a year of massive spending bills designed to help struggling homeowners avoid foreclosure. As a result, there are several new government programs for mortgage assistance that homeowners should know about.
Collectively, these programs fall under the Homeowner Affordability and Stability Plan, announced in February of 2009. Many people are confused by this plan, and it’s easy to understand why. The abundance of press conferences, similar-sounding program names, and esoteric acronyms is enough to confuse anyone.
In this article, we have clarified the components of the mortgage assistance program in a way that everyone can understand. We have also provided some useful links to related information, to help you determine your eligibility for these programs. But first, a bit of background:
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Do You Qualify for a Refi? |
The Homeowner Affordability and Stability Plan was announced by President Obama on February 18, 2009. It is expected to cost more than $75 billion, when all is said is done.
The primary goals of this government mortgage assistance program are (A) to reduce the number of home foreclosures in 2009 and beyond, and (B) to help people refinance their mortgages into more affordable fixed-rate loans. In other words, there is a mortgage modification side of this program, as well as a refinancing side.
As you can see from the image above, your current payment situation will dictate the type of program you qualify for (if any). If you are falling behind on payments, refer to Option ‘A’ below. If you are current on your payments, refer to Option ‘B’ for more information.
Here’s what you should know about each one of these options:
Option ‘A’ — Mortgage Modification
If you are currently in default on your home loan, or at risk of defaulting soon, this is the government assistance program you should look into. Here are the pertinent details.
- Under the mortgage modification plan, homeowners who are falling behind on their payments could have their home loans modified by a lender.
- The goal of modification is to reduce the size of the payments, thus helping the homeowner to avoid foreclosure. This is good for the lender and the homeowner alike. The borrower gets to stay in the home, and the lender avoids yet another foreclosure on their books.
- Essentially, this would reduce the monthly payments to about 31% of the homeowners gross monthly income. This would be accomplished by reducing the interest rate in most cases.
- Payments would remain at this level for a limited period of time, five years in most cases. After that, the rate would gradually increase to the conforming loan rate at the time of modification.
- There’s some incentive built into this government program, for both the homeowner and the lender. People who make their payments on time could qualify for a reduction in their principal balance, up to $5,000 over the 5-year modification period. Lenders may also qualify for incentive payments, for each of the loans they successfully modify.
- To qualify for this government program, the unpaid principal of your mortgage (what you currently owe, minus interest) must be less than $729,750
- Speculators and investors need not apply. This program is designed for people who live in their homes as a primary residence.
- Eligibility for this part of the mortgage assistance program will expire in December of 2012.
Related Product: The Loan Modification DVD
The folks at Credit.com recently announced a new DVD designed to help certain homeowners modify their home loans. I looked into this, and it seems like a solid product. It actually comes with other tools, aside from the DVD itself. I know some of the people at this company, so I can recommend the DVD without hesitation. At the very least, it’s worth checking out.
Here’s the information page for the DVD
Option ‘B’ — Refinancing Assistance
If you are current on your mortgage payments, but you are unable to refinance because of a recent loss in property values, you may qualify for help under the refinancing side of this program. Here’s what you need to know about it:
- The refinancing side of the plan would allow more people to refinance their homes. In particular, it would help those who have lost a lot of equity in the last couple of years.
- Normally, you would need at least 20% equity to qualify for a refinance loan. But under this part of the mortgage assistance program, homeowners with no equity (or even those who are slightly underwater) could qualify for refinancing.
- To qualify for this form of assistance, your mortgage loan must currently be owned by either Freddie Mac or Fannie Mae. You can use the links provided below to determine this, or you can find out by asking your current lender / loan servicer.
- If your property value has dropped severely (i.e., California), you may not qualify for this refinancing program. While traditional equity requirements have been relaxed under this government assistance program, a homeowner cannot be underwater by more than 5 percent. If you have positive equity — even a little — you’ll have a better chance of qualifying.
- You must be current on your mortgage to be eligible for this refinance program. Note: In this context, “current” means you have not been been more than 30 days late on your monthly payments over the last year.
- People with jumbo loans need not apply. In most parts of the country, a mortgage loan greater than $417,000 would fall into the “jumbo” category. Such loans are generally not eligible for refinancing under this government program.
- In certain high-priced areas such as New York, a loan greater than $417,000 may be considered a “conforming” loan and not a jumbo loan. Thus, the homeowner would likely qualify for the mortgage assistance program. When in doubt, ask! Use the links provided below to find out more.
- This part of the government assistance program is currently set to expire in June of 2010.
I hope you found this article helpful. I will update this tutorial as needed, to reflect changes or additions to the government’s plan. If you have any questions about this program, or other types of homeowner assistance, feel free to shoot me an email.
Excellent article – very helpful and good links.
Thank you Joan. I’m glad you found it helpful. ~Brandon
Very helpful article. Excellent clarity and easy to read. I appreciate it!
My wife and I have been trying to get Citi to modify our loan according to the “new” program and we keep getting stonewalled and told “we don’t know anything about that” They are trying to put us in to a mod plan with a balloon payment at the end of 6 mos. I know Citi is participating but how do we get to the correct people to work with?
Thanks,
David in Shawnee, Ks.
David: You’ve just touched on one of the most frustrating barriers that homeowners are experiencing right now. Companies like Citi put out these press releases about how they’re doing their part to help struggling homeowners — but when those people contact them for help, it’s like trying to get in to see the Wizard of Oz.
I do know that they have certain profiles for the types of people they help. One of the criteria used by most lenders is that a homeowner must be behind on payments to qualify for mortgage mod. But in your case, it just sounds like the customer service people on the front lines are clueless.
Maybe somebody who recently got a modification through Citi will chime in here on the blog.
-Brandon
I just spoke to someone from citi at 877-971-9710 specifically for the ‘new’ Homeowners Assitance Program. They asked me a lot of questions during a survey; we are current on our loan but can’t refi because we are under water. I am told I will be contacted within three weeks by a consultant with my options. I am not sure if we will be told we have any options but I will wait and see. Hope this helps.
I tried tp participate in this new program. It is not for the homeowner, it is for the bank. To modify your loan, you have to be behind and at risk of forclosure. To refinace, they can lend upto 105% of the value. So, here is my senario. I puchased a home in 07 that appraised at 195,000. I mortgaged 173,000. Just 18 months later my home is now worth 109,000. I am not behind in payments amd not at risk of forclosure. For me to refinance my home, I need to bring almost 60,000 to the table. Here is my problem with this whole deal. People that bought more house than they could afford will get help. The banking industry that made the bad investments will get help. Those of us who played by the rules will get no help and probally end up in the next batch of forclosures in a year or so.
I called 1-877-971-9710 and they told me that someone will call me in next 24-48 hours
Citi is ridiculous, I called atleast 10 other numbers till finally someone transfered me to this number
Please tell everyone to call this number under the MakingHomeAfforable.gov program
We called our lender, Countrywide to refinance because we owe 350,000 on a house we bought for 390,000. We are not behind in payments just trying to refinance for a lower mortgate rate since we are upside down on the loan now. The house dropped considerably in value. Countrywide took 6 weeks to call us back and said our house is only worth 250 without sending anyone out to apprais it. They just said this is all your house is worth so they said we couldn’t participate unless we came up with a lot of cash.
I contacted Citi via the web citimortgage.com and scheduled an appointment for someone to call to gather information to see if I am eligible for the refinancing (since I owe more than 80% and am current with my payments) and they called when they said they would. They took information and I was told I probably qualify and someone would call me back within three weeks to start the process, but they are very busy. I hope I hear from someone. If not, I’m not sure where to turn.
I am in the same boat as Annie. I spoke to someone Friday at citimortage. They asked questions for about 5 minutes, then said someone will be contacting me within 3 weeks. One question they asked was how much I would want my payment lowered to, or how much I could afford. My current payment is $2600 or so, and I said $2k/month would be ideal.
This new plan is good and all and maybe it will help a lot of people out there, but if banks aren’t subordinating any 2nds if its over 85% then what good is this program??? The type of program we need is to help those that have a 2nd mortgage and are over 85% because there are more people out there with this problem and nobody can get approved!
I just got an offer of modification. Not sure if I should take it or walk away. As much as I am wired to fulfill my obligations, the stress for my family has at times been unbearable …. especially for our children. This is their home. It took 6 months for them to offer this solution, during which I could send them no payments. I did pay off other debts though, thank goodness. I am not trying to sound ungrateful…just not sure I want a modification that extends my loan to 36 years, and has a balloon of unpaid interest at the end. Yeah, we can keep our home, but at what cost?
I am dealing with Chase in the same situation. I pay all my bills on time but $$ is sooo tight and we are well over 31% for our morgage/income ratio. I was told they’d have to “ding” (my excellent credit) for 3 months…to MAYBE qualify. They have red tape and clauses all over the place to not let ppl qualify for these loans. They sound helpful and useful, but at the end of the day you just get frustrated from the run around. I don’t understand why the people that play bills and step up to their responsibilities and budget so tight just to play the bills can’t get any assistance, but the banks and individuals behind on their obligations get the world handed to them??
I own the condo.I lost my job, so far my payment is on time, but I am worry. My bank is not Freddie Mac or Fannie Mae. Does anyone know if I am eligible for refinancing assistantce?
We are underwater because of a neg. option am. loan initiated in Feb. 2007 with terms and conditions borderline fraudulent. We don’t care that our house has dropped in value. We seem to be in neither option A or B. We are at the mercy of the company we pay to which is not a mortgage company. So they claim they don’t do modifications or refinances even though their website says they could use that option-Homeq Servicing. They plan to increase our monthly payments with a balloon after 5 years. Their intent is that we refinance during that time. How can one do so when the note won’t be changed and our home will still be upside down? What can we do besides walking away?
My loarn principle is 420,000 I have no late or behind payments. I can’t get refinanced becasue value of my home has dropped over 100,00 I will probably go into foreclosure by years end. I am employed on my second job in 18 months. Income is less than career job of 12 years lost in fall of 2007. I don’t know what to do now. ARM goes into effect soon on my loan……….. I may have to walk away from my home also.
I have a loan with Citi. I first called Citi in October and was told there was nothing they could do for me. I called again in Feb. when my husband lost his job because of the company closing. I was put through their stupid website. I started calling several times a week. I was finially giving the name of the rep. I was assigned to (never actually talked to them). However, once I got that name I was able to get through the first line of customer service people everytime I called. Eventually I recieved a letter in the mail saying that Citi was trying to collect a debt from me. Turned out that I had been assigned to a sub company to be put through the qualification process for the modification program. THEY NEVER CALLED ME ONCE.
I am a senior citizen and I have a question about home modification. My question: Will I be able to sell my house in three or five years?
If someone have that info in please let me know. I have search the web but can not find the answer. Being a senior citizen I am very caution!!
ThANKS! VIVIAN
I can’t imagine a modification would prevent you from selling your home down the road. In fact, I don’t even see how that could be legal. But this is a question for the loan servicer who modifies your mortgage. They are the only ones who can tell you what it entails.
Brandon,
I thought there was talk of extending loans to people who were up to 25% underwater (like us — we are in CA and house has dropped in value over 100K). Do you have any information on that, or was it talk that never got formalized?
Marissa – Here is some information about the 25% guideline:
CNN Money article
The Making Home Affordable website (government) has been updated with the following text: “You may be eligible if your first mortgage does not exceed 125% of the current market value of your home.” So it seems to have been formalized. Hope that helps.
My husband lost his job 7 months ago. We are not upside down owe $136,000 worth about $300,000. We have never been late on mortgage payment which is $1671- including taxes (fifteen year fix with about 10 years left to pay). I still have my job with about $40,000 in income before overtime. We do pay a monthly common charge of $625.00 would we be able to refinance to a longer term – 30 years to help us make payments as we are getting very scared and using 401K to make mortgage payments. We have a cc score of about 740 but we do owe credit card debet of about 7,0000. Is there any help.
Hi Laurie.
I’m not exactly sure what you are asking me. What are you trying to do? Modify your loan to lower the payments?
I lost my job and then my husband had to go in the hospital, so with no money coming in we got behind, I applied on line for help from Citi, they got back to me asap, they were very very nice and they will be able to lower my payments by $1000 and my new loan is @ 2% GREAT, however we have not missed a payment, we are up to date and they told me that this months payment (original loan) does not have to get paid and the new will be due 30 days from the time I get the final paperwork. I am very very nervous about not paying this month. Has anyone gotten this far and if so how did it work out?
I am a contract writer and a single mom. I have only worked 2 1/2 months in 15 months. Going into October, I am looking at receiving no income from work–only a $700 in child support. With child support and the little contract job, I will make $12,000 this year. I have a first and second mortgage–total payment is $1,500 @ month. I purchased the house in 2003 for $190,000–it is worth $230, and I currently owe $210,000. My mortgage company is Bank of America and Fannie Mae owns my loan). I’m not behind in my payments yet, but I can’t make Oct’s payment. (And, unfortunately, I do have $11,000 in credit card debt.) I have repeatedly tried to get a hold of someone at Bank of America. One representative told me that if I don’t pay my mortgage for 3 months, I will get help. A second representative told me that in 3 months BOA will start the foreclosure process. Anyway, my question is: can anyone tell if I may be eligible for loan modification?
Anyway, it sounds like many of you are in similar, dreadful situations. I should compile all these complaints about the banks and send them to Washington. (At least I’d feel like I am doing something besides helplessly watching the grim turn of events.)
Thank you for any feedback!
Me and my wife, We were running a tight ship and makeing our mortgage payment on time and wanted to see if we would qualify. Initally we did qualify and were put on trial payments we didnt recieve any paperwork for the first 2 months, on the Third month we finally recieved our paper and were put on the 3 month trail period and continued makeing all payment on time. After our now 5th payment we recieved a letter saying we did not qualify and had to pay a ballon payment of the 5 month back payments within 2 week our our mortgage would be subject for foreclouseure and credit reporting. Now it getting the run around trying to talk to loss midigation trying to waive late fees and on top of it they are trying to carge me $1000 on top of what is actually owed. Rule of thumb dont try this if you currently make your payments on time, you will then really be fighting to save your home
I see a lot of issues with citi, but our issue is with PHH mortgage where it seems they are dragging their feet on a loan modification that should have only taken 90 days at best to resolve… to date the issue has been going on since February and is still not resolved. Is there anyone who can help?
I have about 12 phone calls to Citi over the last 3 months. They have so many walls of defense and evasion, as some one said before they Will Not work with you unless you are at the point of foreclosure. The reason I am with Citi I refinanced about 3 years ago. Took my loan from a local bank. They refinanced it for it for $25,000.00 more than it was worth at the time. Just like going to a pawn shop.