About Short Sales

There’s been a lot of chatter about Obama’s administrations Making Home Affordable Program. This program announced in March of 2009 has two components to it: 1) the Home Affordable Refinance Program or HARP for short and 2) the Home Affordable Modification Program also known as the HAMP program. The primary objective of the Making Home Affordable Program is to help stabilize housing prices. By helping you to stay in your home that puts one less foreclosure on the marketplace that ends up selling at a lower than market price – which in turn helps to stabilize the value of everyone else’s home around you. The government believes that by helping to stabilize the housing market and help to keep people in their homes it will help to stabilize the broader economy.

The Nuts and Bolts of Make homes affordable program. If your mortgage is held by Fannie or Freddie, you may be eligible to refinance if 31% of your monthly income is greater than or equal to the monthly payment on a 30 year fixed mortgage at the current market rate. The property in question must have lost market value to the point where you have less than 20% equity, and are thereby unable to refinance on the open market. While properties with some negative equity (that are slightly “underwater”) are eligible, the loan cannot be for more than 105% of the market value of the property. If your mortgage is NOT held by Fannie or Freddie, or, if it is and and you don’t meet one or more of the other criteria, you may be eligible for a five (5) year loan modification. The goal of the modification is to reduce your monthly payment to 31% of your gross (pre-tax) monthly income. This is accomplished by temporarily reducing the interest rate on the loan. If the interest rate required to reduce the monthly payment to 31% of income is less than the payment on a 30 year fixed loan at the current market rate, the interest rate on the loan is then gradually stepped back up on a yearly basis until it matches the current market rate at that time of participation.

Under the guidelines of the HAMP program your interest rate can be lowered to as low as 2% for up to 5 years, the bank may also extend the repayment term up to 40 years, and a portion of the principle balance of your loan may be placed on forbearance – A big word meaning its still hanging out there but you don’t have to pay interest on it for a certain period of time. If you sell your home – you’ll still have to pay that money back. All of these factors are designed to get your mortgage payment down to 32% of your gross household income.

Indeed, TARP provides the Treasury Department the means by which to leverage better rates from mortgage companies. Under the guidelines for the MSA put out by Treasury thus far, if a lender has received any financial assistance under TARP (most mortgage lenders), the lender is obligated to participate in the MSA and to renegotiate new terms for struggling mortgage holders. Under 2 (9)(A), TARP defines “troubled assets” as, Residential or commercial mortgages and any securities obligations or other instruments that are based on or related to such mortgages, that in each case was originated or issues on or before March 14, 2008, the purchase of which the Secretary [of Treasury] determines promotes financial market stability. TARP, 2 (9)(A.) Thus, the definition of “troubled assets” to be purchased by the Treasury explicitly includes residential or commercial mortgages … originated or issued on or before March 14, 2008.” Id. TARP delegates the implementation of the program to Treasury, providing that the Treasury will develop its own regulations in implementing what “troubled assets” to purchase. TARP. Section 101 (Purchases of Trouble Assets) provides for the Treasury to determine what troubled assets to purchase and under what guidelines:

It is up to your particular lender to determine how they want to modify your loan – they don’t always have your best interests at heart so be careful. If you feel the new terms they are offering you are going to put you in a worse situation down the road you do have options. You should consult your attorney or a reputable company that regularly deals in loan modification such as SureFast Loan Modification.com. These competent professionals can help to make sure you get the best deal possible and don’t get taken advantage of by your bank.

Learn more about Obama Mortgage Relief Plan Qualifications.