Homeowner Affordability and Stability Plan

Part of the Stimulus Plan has been designed to help homeowners who are current on their mortgage and those in default. Today I will address those whom have not fallen behind and would like to refinance to a lower rate (if available) but are unable to do so primarily due to lower home values. This applies to homes securitized by Fannie Mae and Freddie Mac .

In a typical refinance of a single family home, owner occupied, where the borrower is just looking to lower their rate and monthly payment and there is no cash paid to the borrower at the closing. This is referred to as "rate and term. Limited cash out (under $1,000) is also allowable. You must still have sufficient equity in the property for either loan. The Fannie Mae guidelines state that you can borrow up to 95% of the value of the home. Maximum cash-out exceeding $1,000 is 85%. However, if the property is located in an area determined to have declining values, the maximum LTV is lowered by 5%, to 90% and 80% respectively. Most areas of the country are experiencing declining values and many borrower's who purchased in the last 4-5 years do not have enough equity in their property to meet the minimum 90% LTV threshold.

The new plan states eligible loans (including any refinancing costs) can be as high as 105% of the current appraised value of the home. Lets say your home is worth $200,000 but you owe $210,000 or less, you may be able to qualify to borrow up to the $210,000. While this may help some homeowners, many will still be left out as homes in many areas have declined 20-30% in value. This will primarily help those who purchased the home in the last year or so and those who have adjustable rate mortgages which are set to adjust higher.

Send me an email and I will provide you with a question and answer form which details the plan further by addressing first and second mortgages, eligibility, multi-family homes and more.