Mortgage Refinancing Plan aka Home Affordable Refinancing
The mortgage refinancing plan is one of the pillars of the
Making Home Affordable plan (the
Homeowner Affordability and Stability Plan). It helps homeowners who owe more than 80% of the value of their homes (i.e. their equity is less than 20% or negative) secure lower monthly payments by refinancing their mortgages at the historical low rates available today (around 5.07% as of 9/10/09).
Who qualifies for mortgage refinancing?Homeowners that:
- Use the property as their primary residence;
- Are current on their mortgage payments;
- Took out conforming loans that are owned or guaranteed by Freddie Mac and Fannie Mae (NOTE: the fact that your original lender were not Fannie or Freddie, does not mean that they may not own your loan - continue reading below);
- Owe less than 125% of the current value of their homes (Note: the Treasury increased the maximum to 125% from 105% to cover more homeowners).
- People who have second liens (those who have equity lines of credit) qualify as long as the first lien is less than 125% and the junior lien holders agree to be subordinated to the new first mortgage.
What is a conforming loan?The simple answer: a conforming loan is one that is below $475,000 (or $729,750 for high cost areas).
More generally, it is a loan that conforms to the standards that Fannie Mae and Freddie Mac use to purchase loans and securities in the secondary markets. Check
this FHA page to find out what the limit in your area is.
Who will refinance the mortgage?Refinancing will be performed through either Fannie Mae or Freddie Mac via your current mortgage agent.
How many people will the mortgage refinancing program benefit?The Treasury department estimates that 4 to 5 million homeowners will benefit from the mortgage refinancing program
Why is the mortgage refinancing program necessary?Why can't these people refinance on their own? While homeowners that qualify for the mortgage refinancing plan did give a down payment at the time of purchase of their properties, because of the collapse in home prices of the last two years, their equity has fallen below 20% of the value of the property. In the current financial environment banks are unwilling to refinance their mortgages to a lower interest rate unless they bring their equity to 20% (to make the loan eligible to be purchased by Fannie Mae and Freddie Mac), something that many a homeowner can not do..
If my original lender was not Fannie Mae or Freddie Mac, am I eligible for the mortgage refinancing plan?You may be eligible as the loan may have been purchased by either of those two institutions. To find out whether your loan is owned or securitized by Freddie Mac and Fannie Mae, you can contact:
Fannie Mae: 1-800-7FANNIE, or go to: www.fanniemae.com/homeaffordable
Freddie Mac: 1-800-FREDDIE, or go to: www.freddiemac.com/avoidforeclosure
NOTE: Just to be clear - we are NOT a government sponsored site, and we try to keep the information on the site accurate and up-to-date. Nevertheless, there may be errors, and you should check the information on qualifications and other details for the plans with your mortgage agent. For homeowners the government provides a simple self-assessment test at: http://www.makinghomeaffordable.gov.