April 17th, 2009

By Andre Plessis
How To Know If You’re Eligible For a Making Home Affordable Refinance or a Loan Modification Under The Government Programs

April 4, 2009, marked the official start of the Making Home Affordable refinance program.

The Making Home Affordable Program is expected to help approximately 5 million homeowners. Not every homeowner will be eligible for a Making Home Affordable refinance or loan modification. There are 3 basic criteria that must be met.

First, your existing home loan must be backed by either Fannie Mae or Freddie Mac.  Both investors provide online lookup services.  Start with the Fannie Mae site because Fannie has a greater market share and because Freddie Mac’s site requires your social security number.

Next, you must have a perfect mortgage payment history over the last 12 months.  One payment made 30 days late will disqualify you from being eligible in the Making Home Affordable program. 

Also, the balance on your mortgage cannot exceed your home’s value by more than 5%.  As an example  if your home is worth $100,000, you should not owe more than $105,000 on your mortgage. The math formula is (Mortgage Balance) / (Home Value).  If the quotient is greater than 1.05 then your loan-to-value exceeds 105% and you are not eligible for Making Home Affordable. To find out about your situation just divide your mortgage amount by the value of your home.

Now, assuming you meet the above criteria, there are some noteworthy details of the Making Home Affordable program:

1. All refinances require income verification, even if the original mortgage was a stated income loan.
2. Second mortgages cannot be paid off using loan proceeds, they must be subordinated
3. If you didn’t pay mortgage insurance prior to refinancing, you won’t have to pay it after refinancing, even if your loan-to-value exceeds 80%.

There are other guidelines, too, and both Fannie Mae and Freddie Mac mention information on their websites to the Making Home Affordable program.

If you have specific questions about the Making Home Affordable program and your own eligibility, first check to see if Fannie Mae or Freddie Mac are backing your home loan.  You can also call your lender, or servicer to find out more about your situation and options.