The Making Home Affordable program is officially official. Mortgage lenders are now processing applications and paperwork for the help-the-homeowner plan often referred to as "The Obama Plan".
Because Making Home Affordable is a new program, there have been a lot of questions about how it works, who is eligible, and how to apply for a Making Home Affordable refinance.
What follows is a collection of questions and answers from my clients, the press, plus other things I think you should know.
Of primary importance -- first -- are two points:
1. Only Fannie Mae- and Freddie Mac-backed loans are eligible for The Obama Plan
2. Fannie Mae and Freddie Mac use different sets of refinancing rules
Be forewarned. In some respects, Fannie Mae and Freddie Mac are like the National League and the American League -- it's the same game, but with different rules.
Either way, homeowners will have a very different experience with the Making Home Affordable refinance program if their home loan is held by Fannie Mae versus Freddie Mac. Therefore, I'm going to keep the questions below general in nature. I'm also available by email to answer whatever personal questions you may have about The Obama Refi Plan and your household eligibility.
How do I know if Fannie Mae or Freddie Mac has my mortgage?
Both Fannie Mae and Freddie Mac have easy-to-use "lookup" webforms on their respective websites. Check out Fannie Mae's lookup form first because Fannie has a larger market share.
Plus, you won't have to give your social security number like you do for one at Freddie Mac. As an alternative, use the 800 number on your mortgage statement to find out the same information.
Am I eligible for a Making Home Affordable refinance if I'm behind on my mortgage?
No. You must be current on your mortgage to refinance through the Obama Plan. If you are behind on your payments, a loan modification may by an alternative to lowering your monthly payments.
What if neither Fannie Mae nor Freddie Mac has a record of my mortgage?
If your mortgage isn't on the books at Fannie or Freddie, your loan is ineligible for the Making Home Affordable refinance program. You may still be eligible for a "regular" refinance to lower rates, however. Check with your loan officer to get a quote.
What do I do now that I know my mortgage is a Fannie Mae or Freddie Mac mortgage?
Find your last mortgage statement and, in big letters, write "Fannie Mae" or "Freddie Mac" -- whichever is backing your home loan. You'll need to remember this information because the Making Home Affordable program follows a different path to closing with Fannie versus Freddie. Next, call your loan officer and tell him that you want to explore your Making Home Affordable options.
What are the minimum requirements to be Making Home Affordable-eligible?
First, your home loan must be current. Second, you'll can't be more than 5% underwater on your home. Officially, this is known as having a 105% loan-to-value.
How do I know if my mortgage exceeds the 105% loan-to-value limit?
Take your the balance of your first mortgage and divide it by the value of your home. This is your loan-to-value. Don't forget that your loan balance at the time of refinance will be higher than just your principal balance. It will include daily accrued interest, too.
I put down 20% when I bought but I've lost a lot of home equity since. Will I have to pay mortgage insurance because of my Making Home Afforable refinance?
No, you won't. If your home loan doesn't require private mortgage insurance as-is, you won't have to start paying it on your new home loan. The logic behind the move was detailed in a letter to mortgage insurance companies saying, in summary, any new mortgage is going to have lower payments and, therefore, be less risk. In other words, there's no more need to insure the new loan than there was the old one.
I pay private mortgage insurance now. Will my mortgage insurance payments go up with a new Making Home Affordable refinance?
No, your private mortgage insurance payments will not increase, based on the same letter referenced above. However, the "transfer" of your mortgage insurance policy requires some extra steps. Remind your lender than you're paying PMI to help the process move more smoothly.
What's the biggest mortgage I can get with a Making Home Affordable refinance?
Obama Plan refinances are limited to the lesser of 105% of the home's value, or the area's conforming loan limits. In most cities, the conforming loan limit is $417,000. However, there are some cities in which conforming loan limits are as high at $729,750. There's an easy-to-read, updated-for-2009 loan limit chart at http://www.esavemortgage.com/loan-limits.
Can I do a cash out refinance with the Making Home Affordable program?
No, only rate-and-term refinances are allowable according to the Making Home Affordable mortgage guidelines.
Can I consolidate mortgages with a Making Home Affordable refinance?
No, you cannot consolidate multiple mortgages with the Making Home Affortable program. It's for first liens only, even if the first and second liens were opened simultaneously, at the time of purchase. All subordinate/junior liens must be resubordinated to the new first mortgage. If you're unclear about what this means, talk to your loan officer.
Can I "roll up" my closing costs into a Making Home Affordable refinance?
Yes, mortgage balances can be increased to cover closing costs in addition to other monies due at closing such as escrow reserves, accrued daily interest, and a small amount of cash to cover the per diems of a mortgage payoff. There is a maximum allowable increase, however, and it varies between Fannie Mae and Freddie Mac. In no case, though, may loan sizes exceed 105% of the home's value, nor may they exceed the local conforming loan limits.
I am unemployed and without income. Am I eligible for a Making Home Affordable refinance?
No. Income verification is required for all would-be refinancers.
My original mortgage was a stated income loan. How will my income be verified with a Making Home Affordable refinance?
Appicant income is verified in the same manner as with a traditional refinance -- using a combination of W-2s, recent paystubs, federal tax returns and other, underwriter-requested documentation.
What are the interest rates for the Making Home Affordable program?
Mortgage rates based on the price of mortgage bonds, an openly-traded security. Like stock prices, bond prices change all day, every day. The mortgage rates available to Making Home Affordable participants are the same rates offered to every other conforming mortgage applicant.
Will my Making Home Affordable refinance require loan-level pricing adjustments?
Yes, Fannie Mae and Freddie Mac apply loan-level pricing adjustments to Making Home Affordable refinances. This may cause your interest rate to increase beyond the "market rate", or your closing costs to rise, or both. Loan-level pricing adjustments are "risk-based" fees based on a person's credit score and his loan-to-value, similar to how auto insurance policies vary between a minivan and a sports car, for example. There are special LLPA charts, specific to Obama Plan refis. Ask your lender about it.
Is there a minimum credit score for the Making Home Affordable refinance program?
No, there is no minimum credit score requirement for Making Home Affordable refis. Lower credit scores may be subject to higher loan-level pricing adjustments, though.
Do I have to refinance my mortgage with my current servicer?
In some, but not all, cases, Making Home Affordable applicants are required to refinance with their existing mortgage servicer. One general recommendation is pursue a Making Home Affordable refinance as you would any refinance until Fannie or Freddie tells you otherwise. This way, you get to work with a person familiar to you as opposed to working with a Call Center employee.
What does the term "DU Refi Plus" mean? I keep reading it and don't understand.
DU Refi Plus is the name Fannie Mae assigned to its Making Home Affordable program. "DU" stands for Desktop Underwriter. It's a software program that simulates mortgage underwriting. "Refi Plus" is a gimmicky-sounding term that could have been anything. The name has been trademarked, however. As an aside, Freddie Mac is using the branded name "Relief Refinance".
I want to remove my spouse from the mortgage paperwork. Can I do this with a Making Home Affordable refinance?
No. The Making Home Affordable mortgage guidelines specifically prohibit removing a signer from the note. To remove a spouse (or co-signed) from the mortgage, a traditional refinance is required.
For how long should I lock my mortgage rate with the Making Home Affordable refinance program?
It's recommended that all Obama Plan refi are locked for 60 days at a minimum. This is because the Making Home Affordable program is new and mortgage lenders are not 100% familiar with its operation. In theory, The Obama Plan is streamlined for simplicity. In practice, however, there's a lot of grey area and that can cause delays. Better to have a rate lock that lasts too long than not long enough.
Now, this was just a starter list of questions; a basic introduction to the Obama Refi plan. It's 22 questions and can't possibly be comprehensive.
If you have a specific question about Making Home Affordable, or want to apply for a Making Affordable refinance, email me using the contact information at the top of this page.
Sources Fannie Mae Home Affordable Refinance FAQ March 4, 2009 https://www.efanniemae.com/sf/mha/mharefi/pdf/refinancefaqs.pdf
Freddie Mac Relief Refinance MortgagesMarch 12, 2009 http://www.freddiemac.com/sell/factsheets/relief_refi.html
