Mortgage Help

An Americans Guide to the 2012 Government Mortgage Assistance Payments and Help Programs

The recession has caused the government to pass a lot of spending bills in this year of 2010. The intent of the bills is to help people who own homes avoid foreclosure. If you’re a homeowner, you should know about the government programs that will assist you with your mortgage.

The government programs were announced in February of 2009 and are part of the Homeowner Affordability and Stability Plan. This plan is complicated and can be difficult to understand. The reason is because there has been a lot of press conference, there are many programs that sound the same, and there are a lot of cryptic acronyms.

To help you make sense of it all, we have put together this helpful article which will explain the mortgage assistance programs. You can see if you’re eligible for these programs by clicking on the links in this article. We’ll begin by providing you some background information.

On February 18, 2009 mortgage assistance was announced by President Obama when he unveiled the Homeowner Affordability and Stability Plan. The program will provide about $75 billion in assistance to struggling homeowners.

This government mortgage assistant program is designed to accomplish two goals. First, it will help some homeowners avoid foreclosures this year and for years to come. Second, it will help current homeowners refinance their mortgages so they make less payment every month by using fixed-rate loans. So this program helps people modify existing mortgages and refinance their homes.

The above picture demonstrates that if you qualify for any program, how you’re paying your current program shows which program you’ll be able to use. The first option is for people who have not been able to keep up with their monthly mortgage payments. The second option is for people who are current on their monthly mortgage payments.

This article will provide in depth information about both options.

First Option – Loan Modification

This option is designed to help if you haven’t been able to keep payments current on your existing mortgage. You should also consider this option if you think you’re going to have problems meeting mortgage obligations in the near future. Here is some more information.

• If you are not able to keep up with your monthly mortgage payments, you might be able to work with a lender to get the terms of your mortgage changed.
• Your lender should be able to reduce how much money you’re expected to pay every month, helping you avoid foreclosure. This benefits the lender as well as you. You get to keep your home and the lender avoids having to go through the foreclosure process.
• Your monthly mortgage payments would only be about 31% of your gross monthly income. Most of the time this is accomplished by reducing the interest rate, allowing you to pay off more of the principal.
• Your decrease in monthly payments would only last a certain length of time. Most of the time, it will be five years. After the time period is over, the monthly mortgage payments would slowly increase to be equal what it was at the time the mortgage was modified.
• Homeowners and lenders both have motivation to participate in this government mortgage modification program. If you are able to make your monthly payments on time, you may be eligible for a reduction in your principal balance. Over the 5-year modification period, you could cut $5,000 from the amount you owe on your home. Lenders benefit by qualifying for incentive payments for each loan they successfully modify.

• In order to be eligible to take advantage of this program, the amount of money left owing on your house without interest needs to be less than $729,750.
• The program is designed to help people who have their homes as the primary place where they live. Speculators and investors will not benefit from the plan.
• After December of 2012, nobody will be able to become eligible for this part of the mortgage assistance program.

What is my next step? Contact your lender to see is they are participating in this mortgage assistance program. Go to the government website at Financial Stability.gov for more information.

Second Option – Mortgage Refinance

Suppose you are able to make your monthly mortgage payments, but you can’t refinance because the value of your home has gone down. In that case, you could get help under the mortgage refinance option of the mortgage assistance program. Here is some more information.

• This part of the government mortgage assistance program opens the door so more people can take advantage of refinancing their homes. It will mostly help people who have lost a lot of their home’s value.
• Under normal circumstances, you would need at least 20% equity to be eligible for a refinance. This program helps people with no equity and even those who have a negative equity qualify for refinance loans.
• In order to be eligible for mortgage refinance, you current loan must be owned by either Freddie Mac or Fannie Mae. We have included some links to help you determine if you qualify, or you can just ask your current lender.
• If the value of your property has plummeted too low, you may not qualify for this part of the mortgage assistance program. This has unfortunately has been the case in many areas, especially California. To qualify, you cannot be underwater by more than 5 percent. Even a tiny bit of equity increases your chances of qualifying.
• To qualify for this refinance program, you must be consistently making your monthly mortgage payments. For the past year, you must have been making your monthly mortgage payments within 30 days of the due date.

• If your loan is more than $417,000 then odds are you will not qualify for refinancing. This is what is called a jumbo loan.
• However, if you live in an area with higher property values such as New York, then you may qualify even if the loan is more than $417,000. The loan in this case is called a “conforming” loan instead of a jumbo loan. If you are not sure whether you qualify for assistance, be sure and ask. Click on one of the links we provide underneath this article to find out more.
• In June of 2010, the mortgage refinance option is scheduled to expire.

What is my next step? Find out if your loan is owned by Fannie Mae or Freddie Mac. Ask your current lender or use the resources provided by the Fannie Website and the Freddie website. Go to the government website at Financial Stability.gov for more information.

If you’re having trouble meeting your mortgage obligations, hopefully this article provided you some useful information. As the government plans or changes are made to it, I will update this information. If you have questions about government mortgage assistance programs or other types of homeowner assistance,including assistance with mortgage payments please feel free to contact us through the contact us page.

One of the many causes of the 2008-2011 great recession was the speculative transfer of mortgage backed securities. Unless you live in a bunker in the rainforests of Vietnam, you have probably heard this several times. But what is a mortgage backed security and how did it play a role in the recession? More importantly, what has the government done to avoid it from happening again?

Mortgage Backed Securities

Put simply, mortgage backed securities, or MBSs, are packages of home loans—from several to hundreds—sold to investors. These packages could be further divided and sold to other investors as shares in the security: a product called trenches, which could be divided again into smaller shares called collateralized debt obligations. This created a complex network of interdependent securities spread across financial institutions.

Moral Hazard

What is wrong with this system, you may ask? The answer is another buzz-word you have probably heard many times: moral hazard. Moral hazard is a tendency in economic theory where investors take undue risks because they don’t have enough skin in the game, or in other words, don’t feel the financial pain of their mistakes.

Historically, bank investors would be very careful about the mortgage applications they approved. They would check credit histories carefully and ensure everybody had the financial wherewithal to make their mortgage payments. After all, if the client defaulted on payments, it was the bank or lender that had to foot the bill. However, once mortgage backed securities became popular and banks could quickly sell on their mortgages to other investors, they became more careless about who they loaned money to and started to offer mortgages to sub-prime borrowers. After all, if the client couldn’t make the payments, some other investor, or collection of investors would have to worry about it, not them. Enter moral hazard.

New Rules

In order to avoid this from happening again, the government has created new rules to regulate mortgage transfers. Previously, your mortgage could be sold, re-sold and sold again without your knowledge. In fact, you could easily own shares in your own mortgage without even realizing it. With the new rules set by the Federal Reserve, you will know who owns your loan.

This has an added benefit to home owners. If you don’t know who owns your mortgage and you want a loan modification, a loan refinance or have payment disputes, it can be difficult to know who you need to deal with. With the new rules you will know at all times who owns your mortgage and who you must deal with about payment disputes or mortgage renegotiations.

The new rules require companies that acquire your loan to send you a notice of the mortgage transfer within 30 days of the purchase. This notice must provide the new owner’s name, address and telephone number, as well as the date of the transfer and the agent authorized to act on behalf of the new owner.

One of the many causes of the 2008-2011 great recession was the speculative transfer of mortgage backed securities. Unless you live in a bunker in the rainforests of Vietnam, you have probably heard this several times. But what is a mortgage backed security and how did it play a role in the recession? More importantly, what has the government done to avoid it from happening again?

Mortgage Backed Securities