New Help for Homeowners

The federal government’s new housing program hopes to make mortgage payments more affordable for as many as nine million homeowners. The program includes two types of assistance: refinancing and loan modification. Here are a few questions and answers about the program.

Why does there need to be a special refinancing program?
Many homeowners with more than 20 percent equity in their homes can refinance their mortgages to today’s low rates and sometimes shave hundreds of dollars off their monthly payments. But people whose home values have decreased significantly often have a tough time finding a lender that will refinance their mortgage, especially if they now owe more than 80 percent of their home’s current value. This program will help those people refinance into cheaper loans.

Who qualifies for this program?
To qualify, your loan must be owned or guaranteed by Fannie Mae or Freddie Mac and you must not have missed any loan payments in the past 12 months. You must refinance under this program by June 2010.

How can I figure out if my loan is owned or guaranteed by Fannie Mae or Freddie Mac?
That isn’t always obvious—you make your mortgage payments to a loan servicer, but your loan could still be owned or guaranteed by Fannie or Freddie. Ask your loan servicer if you qualify.

How does the loan-modification program work?
This program is designed to help people who are struggling to make mortgage payments. The government will provide incentives for lenders to lower monthly mortgage payments to 31 percent of the homeowner’s gross monthly income, either by lowering the interest rate to as little as two percent or by extending the terms of the loan up to 40 years. Lenders can also lower the amount of principal owed.

Who qualifies for this program?
To qualify, the loan must have originated on or before January 1, 2009, the principal balance cannot exceed $729,750, and the home must be your primary residence. You must also document your income and sign an affidavit of financial hardship. The modification must take place by December 31, 2012.

Where can I find out more about these programs?
For more information about both programs, including a tool to help you determine whether you are eligible for this assistance, see the “Making Home Affordable” section at http://www.financialstability.gov/.