home affordable refinance program vs home affordable modification program?

Posted on Oct 31, 2012 in Unique Loan Programs

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Question by Ryan: home affordable refinance program vs home affordable modification program?
what is the difference between the two?

Best answer:

Answer by John
Q: I believe there was a material error in your recent article concerning President Obama’s Making Home Affordable Program.

First, seek eligibility for a HAMP loan does not depend on the loan being owned or serviced by Fannie Mae or Freddie Mac. For loans that are so owned there are some separate additional programs under HAMP such as the ability to refinance underwater loans.

Moreover, mind Fannie and Freddie are agents for Treasury to help Treasury administer the HAMP Program. But HAMP in large measure initially was designed to address non-conforming conventional loans, such as subprime loans. Second, the eligible loan amount is $ 729,750, not $ 417,000 as you wrote.

A: Thank you for writing. The column in question did contain those errors (thanks for setting the record straight). But there’s more to the story, so let’s start at the top.

President Obama’s Making Home Affordable Program generally permits certain borrowers to work with their lenders to either obtain a loan modification or to refinance their loan. Effectively, there are two programs, which can make it confusing for homeowners.

Making Home Affordable Loan Modification

Of the 4 million homeowners that President Obama predicted would be eligible to have their mortgages modified, about one million homeowners have received temporary loan modifications, but just 116,000 (as of January, 2010) have received permanent modifications.

If a borrower decides to go down the loan modification path, the borrower has to meet certain financial criteria, including whether the home is the borrower’s primary residence; whether the first mortgage on the home is equal to or less than $ 729,750; whether the homeowner is having trouble paying the mortgage; whether the current mortgage was obtained before January 1, 2009; and, whether the amount you pay on your first mortgage, including, principal, interest, taxes insurance and homeowner’s association dues, is more than 31 percent of your current gross income.

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