Samantha and Tom are both full-time educators, and they pay their mortgage on time each month. They want to refinance with a lower interest rate. However, they can't because their home’s value has declined and they owe more than it’s worth.
Marta and Dave both lost their jobs recently. Marta’s job as an educator fell victim to the record layoffs in 2009. Dave became unemployed when the contractor he worked for went bankrupt. They can't make their mortgage payment this month and don't know when they will find work again.
If you’re in a similar situation to either of these families, you may be eligible for a federal mortgage-assistance program. Making Home Affordable, which took effect in March 2009, is part of the Obama administration's plan to help families afford to stay in their homes and to stabilize the housing market.
The program includes two options:
- Refinancing – for homeowners who are current on their mortgage and have been unable to refinance due to declining home values. This program expired June 10, 2011.
- Loan modification – for homeowners who are behind or at risk of falling behind on their mortgage because their income has decreased. Lenders may agree to lower the interest rate and/or lengthen mortgage repayment terms for eligible homeowners. This program expires Dec. 31, 2012.
Are You Eligible?
More than 3 million Americans have refinanced and 728,000 modifications are under way with this program as of November 2009. California is among the states with the highest number of loan modifications.*
Homeowners may be eligible for refinancing if:
- Their mortgage is held by Fannie Mae or Freddie Mac. (Look up your loan at www.makinghomeaffordable.gov/loan_lookup.html)**
- They haven’t been more than 30 days late making a payment in the last 12 months.
- The amount owed does not exceed 105% of the current value.
Homeowners may be eligible for loan modification if:
- Hardships are making it difficult to keep up payments.
- The mortgage started before Jan. 1, 2009.
- Payments are more than 31% of gross income.
- Amount owed is equal to or less than $729,750.
Don’t Be Fooled by Fake "Government" Programs
Scam artists who claim to represent the government are trying to cheat homeowners out of their homes and their money. Fraudsters may use terms such as “federal,” “TARP” or “government-approved” and say you must pay them to find out if you qualify. But authorities are cracking down on their scams and reminding homeowners that legitimate government programs are free. Find out more at the State of California Consumer Home Mortgage Information site.
* Source: MakingHomeAffordable.gov, May 14, 2009.
** Web site provided for information only. No endorsement is implied.