Who is eligible for the new mortgage bill passed by Congress?

Mortgages are currently at historically low rates, but millions of familes can’t shed their original home loans and refinance to take advantage.  That’s because home values have dropped significantly, and current rules prevent most homeowners from refinancing if they owe more than 80% of the value of their homes.

Getting a new loan at a better rate — and perhaps getting out from under an adjustable rate mortgage that might have ballooned to a much higher percentage — could save homeowners thousands of dollars annually.  Those savings translate to a monthly payment that could make the difference between foreclosure and keeping a house.

Who is eligible?

In a nutshell – Homeowners who sought loans through or guaranteed by Fannie Mae or Freddie Mac — two lending institutions that recently got a huge infusion of federal funds to keep them afloat — will be able to refinance under this plan

How does the plan work?

The new, refinanced loan can’t be more than 105 percent of the value of the existing home.  For example, if your property is worth $200,000, you may qualify as long as you owe $210,000 or less.

Homeowners with second mortgages are also eligible, but with certain restrictions.  The 105-percent rule remains in effect.  The lender of the second mortgage, however, needs to agree to keep the loan in the “second position” when it comes to monthly payments.  And homeowners still need to prove they can meet the payment terms of the new first mortgage.

Example

The Obama administration gave thie example of how the plan would impact a homeowner paying back a 30-year fixed rate mortgage of $207,000, with an interest rate of 6.5 percent, on a house worth $260,000 at the time of the purchase:

Today, that homeowner still owes $200,000 on the original mortgage, but the value of that home has fallen 15 percent, to $221,000.

The drop in the home’s value makes the homeowner ineligible to refinance under current low interest rates, because most lenders generally require the borrower to have 20 percent home equity.  

Under this refinancing plan, the rules are relaxed and a homeowner could refinance to a rate near 5.16 percent, reducing annual mortgage payments by more that $2,300.

How do I take advantage of this?

You can try contacting your loan servicer directly however oftentimes if you submit all your income documentation to a lender they may reject your application if your package is not submitted properly.  Also, in many circumstances they will approve your loan modification but at a higher rate than what you can afford.  Once you’re are approved it is very hard to reapply for a loan modification at a lower rate.  You usually get better results having a trained negotiator contacting your bank directly (Think hiring a CPA/mechanic/electrician vs. Doing it yourself) Try looking up a local loan modification company in your area and see what they can do for you.  Most companies have trained staff that deal with lenders on a daily basis and can usually work the best deal out for you in your situation.  Lean towards companies with licensed agents or attorneys working for them so they have liability in case something does go wrong.   Also, working through legal negoation can oftentimes drop your balance down to 80% of the value of your property as opposed to the 105% minimum.

Try: Saving the American Dream (800-515-9603) www.savingamericandreams.com 

They have experienced and licensed attorneys that can help you with what you are trying to accomplish.