Obama’s Making Home Affordable program explained by Park City Realtors
May 29, 2009
Sometimes it’s OK to ask what your country can do for you.
Park City’s Keller Williams Real Estate and Zions Bank is sponsoring an information session on June 9 to inform people about President Barack Obama’s Making Home Affordable program.
According to Mike Barnes, most home owners will qualify for some part of the program. He calls it exciting and beneficial. And it’s free.
"In all my experience I’ve never seen anything like this," he said.
Barnes believes many people can benefit from the program because it has two parts. The first is the most accessible one: home refinancing.
In order to alleviate the pain of home owners, the federal government has pushed mortgage rates down to historically low rates. Unfortunately, many owners who pay on time, live within their means and have done nothing wrong don’t qualify to refinance because the value of their home has dropped in the recession.
Recommended Stories For You
If the loan is 80 to 105 percent of the value of the home, the government will assist in the refinancing to current low rates, Barnes explained.
The second part of the program is harder to qualify for, but will save many people’s homes from foreclosure, he said. It is loan modification. The government will take drastic measures to help qualified participants stay in their home.
There are five criteria: if the home is the primary residence, if the mortgage is for less than $729,000 (not a jumbo loan), was obtained before Jan. 1, 2009, if the owner has experienced financial setbacks and if the mortgage payment exceeds 31 percent of their gross income.
The people targeted for this program are those who were victims of loan officers setting up monthly payments way beyond a person’s means and people who obtained a reasonable mortgage but have reduced income because of the recession, Barnes explained.
The goal of the modification is to reduce a mortgage payment to 31 percent of the participant’s gross income and has set strategies for doing so.
"The administration wants it standardized," he said. "They’ve dictated these terms."
The first step would be to lower interest rates incrementally, to as low as 2 percent, until the monthly payment doesn’t exceed 31 percent. If that doesn’t work, the life of the loan could be extended up to 40 years. If that still doesn’t do it, up to $50,000 can be placed in interest-free forbearance, or a delayed balloon payment.
That lower rate will last for up to five years, after which time it will go up to a regular market rate, but then freezes at that for the life of the loan, he said.
"It costs homeowners nothing to do this," Barnes said. "It’s against the law to charge for this service."
But prospective participants should be aware, Barnes said, that loan modifications are costing banks billions of dollars. When a home owner expresses interest in participating, a bank may try to talk them into a refinance instead.
"Be politely, frankly tenacious. Be politely persistent," he advised. "We want to give phone numbers for lenders participating and make sure everyone understands it."
The class to explain the program will follow a "town meeting" format at Newpark Hotel from 7 to 8 p.m. with refreshments provided at 6:45. The event is co-sponsored by Keller Williams and Zions Bank, he said.
Learn more about the federal Making Home Affordable program
When: June 9, 7-8 p.m.
Where: Newpark Hotel at Kimball Junction
Why: to learn how to take advantage of new federal programs to lower interest rates or modify home loans