details on President Obama's Loan Modifcation Plan

The White House Blog does a great job going over the basics of the plan.

Key take aways

  • March 4 – further details will be provided
  • Lenders will be self evaluating their portfolios to see who’s eligible, if you don’t hear from them, than contact them.
  • The program is focused on lowering the interest rates, not writing off loans
  • The loans need to be owned by Freddie or Fannie (you can find out by contacting your lender after March 4) (max loan would be $729,750 than??)
  • Even if your loans exceeds 80% of the value, Fannie and Freddie will refinance (I assume what they mean is that there won’t be an MI fee, or other risk based fee for going beyond 80% in LTV)
  • Maximum Loan-To-Value (LTV) is 105%
  • 2nd mortgagee lenders have to agree to subordinate (i.e. no consolidation, terms of 2nd don’t change unless they you negotiate separately with them)
  • Primary residences only (1-4 units okay)
  • Interest rate you get is a 30 yr fixed at today’s market rate (this is not guaranteed to be better than what you have)
  • BIG Difference – you don’t have to be delinquent to qualify.
  • Current Debt to Income Ratio must exceed 31% (that is you must have a need!)
  • If your loan balance is greater than 105% there are incentives for the lender to reduce principal (let’s see how that plays out)
  • Fees for modification are typical refinance fees (escrow, title, appraisal, points, lender fees,…). Review the Good Faith Estimate, determine time to payback to determine if it makes sense to proceed.

Graph of who it'll help

I hope this program works, I like that fact it’s far more detailed than anything that’s come before it.

Sunil Sethi