Friday, March 20, 2009

Details of the Housing Rescue Plan


Obama's housing rescue plan aims to help homeowners refinance.

By Marcie Geffner

President Obama has announced a new housing rescue plan that aims to help homeowners who are struggling to pay their mortgage. The new plan allows some homeowners to refinance even if they owe more on their mortgage than their home is worth. The plan also includes a loan modification program. Read more about the loan modification program.

Who will benefit from the HASP housing rescue plan?
The housing rescue plan, formally known as the Housing Affordability and Stability Plan (HASP), is intended to help homeowners who haven't been able to refinance because the value of their home has declined.

For example, a borrower whose home was worth $210,000, but who owed $200,000 might be able to lower his or her interest rate by refinancing into a new 15- or 30-year fixed-rate loan.

The housing rescue plan program is open to homeowners who:

  • Earn enough income to afford the payments on a new mortgage.
  • Have an acceptable payment history on their current mortgage.
  • Aren’t currently behind on their payments.
  • Have a mortgage that's owned or guaranteed by Fannie Mae or Freddie Mac.

Fannie Mae and Freddie Mac are the two mortgage companies that were taken over by the federal government last year. To find out whether your mortgage is owned or guaranteed by either of these companies, call your lender or loan servicer.

How will the HASP housing rescue plan work?
New mortgages under the housing rescue plan will have a fixed interest rate and a term of either 15 or 30 years. Lenders may offer different combinations of rates, terms and points, so it's a good idea to shop around for a loan that will fit your needs. These loans will not have a prepayment penalty.

The best part of the HASP housing rescue plan is that it allows homeowners to refinance with a loan-to-value (LTV) ratio as high as 105 percent. For example, if your house was worth $200,000, but you owed $210,000, your loan-to-value ratio would be 105 percent. Without this plan, you might not be able refinance, but with this plan, you might be able to do so.

You will have to pay closing costs and fees, though you may be able to finance those costs as part of your new loan. If you have a second mortgage (i.e., a home equity loan or home equity line of credit), your lender must agree to subordinate that loan to your new mortgage.

The HASP housing rescue plan also contains incentives to encourage lenders and loan servicers to modify some homeowners' mortgages to make the payments more affordable. You can read details about the loan modification program here. Or, visit to find out if you may be eligible for a loan modification.

You can find more information about the housing rescue plan on the White House blog: "Questions-and-Answers for Borrowers about the Homeowner Affordability and Stability Plan."

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