Ever feel like your good habits are cutting you out of the action? Watching your profligate neighbors who can’t afford their homes and never could get loan mods can do that to you. Watching AIG shovel money out the door while you’re watching every dime has a tendency to prickle as well.
Well, now responsible homeowners even in Southern California which normally seems left to fend for itself are getting a piece of the pie. If your loan was purchased by Fannie Mae or Freddie Mac, the cap for refis expired at the end of December, reducing eligible loans to $625,500. Yes, that’s pricey, but still shuts out far too many homeowners in SoCal. The Obama plan reinstates the higher loan limit of $729,750 for loan modifications and refis.
This amount was selected specifically to target higher-priced areas such as Los Angeles and Orange Counties. No doubt others areas of the country will benefit as well, but by far the greatest impact will be here. Of course, just having a higher-priced loan does not automatically qualify the homeowner for the new structure under the Obama’s refinance plan, called Home Affordable Refinance. Homeowners will be able to refinance up to this amount providing the that loan is not more than 105% of the current value. That is, the current market value of the home must be at least $766,237.
If this criterion cannot be met, the homeowner may be eligible for a loan modification under another program in Obama’s plan, Home Affordable Modification. This program will help the homeowner suffering distress lower the monthly payment to 31% of income. In most cases, the lender would reduce the rates to as low as 2% for up to 5 years, or temporarily lower the loan balance or extend the loan to as long as 40 years.
Of course, either program requires the homeowner to have the capacity to pay the refinance or the modified loan. Seeking such aid, the homeowner must provide financial information as well as supporting documents. Finally, something that will help Southern California!