The Obama Refi Plan- Help For Home Owners Refinance Plan Q&A

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, though, are two points:

  1. Your mortgage must be backed by Fannie Mae or Freddie Mac to participate The Obama Plan
  2. Fannie Mae and Freddie Mac are using two different sets of rules

Be forewarned. In some respects, Fannie Mae and Freddie Mac are like the National League and the American League.  Both are playing the same game, but with different rules.

How do I know if Fannie Mae or Freddie Mac has my mortgage?

Both Fannie Mae and Freddie Mac have created easy-to-use “lookup” web forms. 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 for a Fannie Mae lookup 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 refinancing if I’m behind on my mortgage?

No. You must be current on your mortgage to refinance through the Obama Plan..

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.

What are the minimum requirements to be Making Home Affordable-eligible?

First, your home loan must be current. Secondly, you’ll have to be no more than 5% underwater on your home loan.  Officially, this is known as having a 105% loan-to-value.

I put down 20% when I bought but I’ve since lost a lot of home equity. 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 most amount of money I can borrow 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. .

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 two (or more) 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 re-subordinated to the new first mortgage. If you’re unclear about what this means, please call or email me for details.

Can I “roll up” closing costs and pre-paid items into my Making Home Affordable refinance?

Yes, mortgage balances can be increased to cover closing costs and pre-paid items such as escrow reserves, accrued daily interest, and a small amount of cash to cover the per diems of a mortgage payoff.  The exact amount allowable varies between Fannie Mae and Freddie Mac but it no case may loan sizes exceed 105% of the home’s value, nor may they exceed the local conforming loan limits.

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.

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.

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.

If you have a specific question about the Making Home Affordable program that’s not answered above, you’re welcome to call or email me anytime. My contact information is at the top of the page.

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