Who Gets Mortgage Help from Stimulus Package

Who gets mortgage help from stimulus package programs? The program is designed to help credit-worthy homeowners who want to keep their house, but who are finding it increasingly difficult to make their mortgage payments.

Get help before you miss a payment

The 2009 Making Home Affordable program was introduced as part of the federal stimulus package to help homeowners who were facing the likelihood of not being able to make their mortgage payments. The program was not designed for homeowners who have already missed payments and is facing foreclosure.

The program encourages homeowners, lenders, Fannie Mae and Freddie Mac to work together to modify or refinance existing home mortgages. The program focuses on homeowners who have not missed a mortgage payment or been 30 days late in the past twelve months. Specifically, the program encourages:

• Homeowners to contact their lender or mortgage servicer and request either a loan modification or loan refinancing before they miss their first mortgage payment.
• Lenders and mortgage servicers to look at loan modifications and refinancing to lower the monthly mortgage payment for homeowners with mortgages that are guaranteed by Freddie Mae and Freddie Mac. Some potential modifications include:
  • Lower the interest rate of the loan
  • Extend the term of the loan

The stimulus package program can provide assistance to homeowners in a variety of situations. The reasons the homeowners need help are varied. They may have:

• Lost part of their family income due to job loss
• A mortgage loan with rapidly increasing interest rates
• A home where they no longer have enough equity to refinance due to falling local home values

One thing is common among all candidates for stimulus help; the homeowner wants to avoid being in the situation of not being able to make their mortgage payment on time.

The stimulus program allows mortgage loans that are guaranteed or owned by Fannie Mae or Freddie Mac to be modified. The modification can include lower interest rates or longer loan terms.

To qualify for help under the stimulus package, the homeowner must:

• Own a one to four-unit home
• Occupy the home
• Be current on their mortgage payments and have not missed or been 30 days late on their mortgage payment in the past twelve months

Many unemployed homeowners are in jeopardy of missing a mortgage payment. They may be living on one paycheck instead of the two paychecks they had when they first financed the loan. By modifying the loan to lower the monthly mortgage payment, many homeowners may be able to make their mortgage payments using their one remaining paycheck.

Some homeowners are able to make their mortgage payments but they want to lower their monthly payments by refinancing their loan to take advantage of lower market interest rates. If the home value has declined dramatically, the current value of their property may not leave them with enough equity to refinance their mortgage loan.

The stimulus program allows homeowners to refinance their home if their first mortgage is up to 105 percent of the current value of the home.

Many homeowners are suffering from increasing interest rates that are part of "creative" mortgage financing options. These options often let the homeowner purchase a more expensive house with low initial monthly mortgage payments. The payments were designed to increase during the term of the loan as the interest rate increased. Many of these homeowners want to stay current on their mortgage loan and have a steady income to make payments, but the interest rate has risen so significantly that they can no longer afford the mortgage payment.

The loan modification portion of the Making Home Affordable program lets these homeowners work with their lenders and loan servicers to modify their Fannie Mae and Freddie Mac mortgages to achieve a lower monthly payment or to refinance their loans even though the market value of their home may have fallen due to local market conditions or an increasing number of foreclosures in the area.

The time to take advantage of the federal stimulus package is before you miss your first mortgage payment. You should contact your lender or loan servicer as soon as you realize that you are at risk of not being able to make your mortgage payment.

If you want additional information on who gets mortgage help from stimulus package programs before you contact your lender, talk with a counselor at any of the Department of Housing and Urban Development (HUD)approved housing counseling agencies. The counselors at these non-profit agencies are informed about the details of the federal stimulus programs and can work with you to determine if you might be qualified for loan modification or refinancing assistance.

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