Making Home Affordable

[Paul1876]

I'm currently in an interest only 100% loan (80% primary and HELOC) and paying on time. When I purchased the home/loan, I anticipated refinancing after a year or two after additional FICO upgrades and possibly including my wife (dating at the time of purchase, but anticipating marriage) on the loan.

Rather than go through a refinance, I've been considering asking for a loan modification in lieu of doing a full refinance, as I heard banks would consider that to "keep" the business. But now there is the "Making Home Affordable" program, which offers a lot of advantages. My loan servicer is participating, Freddie Mac owns my loan, and my home value seems to be holding steady at 99%-100% (obviously pending formal appraisal, we are hoping for more), so I'd appear to be a candidate.

1) Would participating in the program affect my FICO? A refinance wouldn't in theory, but would participating in this program be seen as a "failure" to pay the loan even if I never miss a payment?

2) The loan is in my name only, could I keep it that way, since I might qualify for lower rates on my own, or being married are we now "locked" financially? I don't want to commit fraud, just want to take the best advantage of the program as written.

 If the program does have a negative effect on my FICO, I'll probably seek a more conventional refinance that I should qualify for, but after hearing so many horror stories, this program seems perfect for me, though finding real details seems almost impossible.

[Anonymous]

I am not sure about it as I have not read the package, but there was alot of talk that peopl with cash out 2nd mortgages and HELOCs might not be eligible for the government programs.  Not sure if that is the case though.  The point was supposed to be to not reward people who "cashed out" the equity from the boom.

As far as a modification goes, are both loan through the same bank? Also, because of the huge numbers of people in need, most companies are not doing mods until you are at least 30 days late which will hurt your credit quite a bit.  Some companies will talk to you, but in general, you have to be behind, and you have to show reasons that you need a modification such as financial hardship, job loss, etc.

If you can qualify for a straight refi, that would be the obvious answer and probably better for you long term than letting your mortgage fall behind and then going through a modification.

[Paul1876]

I think I misrepresented the program, which may have just answered the question. The program is "Home Affordable Refinance" (http://makinghomeaffordable.gov/refinance_yes.html), not the loan modification program which does assume late payments. Your answer threw me at first, because one of the questions to reach that "You Qualify" page was to NOT have a late payment in the last 30 days.

In regards to the HELOC, the program FAQ staes:

6. I have both a first and a second mortgage. Do I still qualify to refinance under Making Home Affordable?

As long as the amount due on the first mortgage is less than 105% of the value of the property, borrowers with more than one mortgage may be eligible for a Home Affordable Refinance. Your eligibility will depend, in part, on agreement by the lender that has your second mortgage remain in a second position, and on your ability to meet the new payment terms on the first mortgage.

The FAQ runs from the Refinance program right to the Modification program, which obviously raised some questions Since this program simply helps me do the refinance to a new lower rate (which hopefully gets me to a conventional program at about the same monthly payment) in today's market conditions, I don't imagine there would be a FICO impact.

Thanks

[Anonymous]

Yeah, there is no FICO impact on a refi except any hits for inquiries and new accounts.  And even a loan mod has no negative impact of they do not require you to skip a payment or naything to qualify.  I was not aure how the final version of the gov't assistance ended up but there had been talk of it being limited to no cash out purchases.  If it doesn't restrict that, and your payment DTI is really high, that may be good for you.  One thing, if you are not running high mortgage DTI, I think that program isn't the right one to sue.  Form what I saw, it it based on getting mortgage payment to 31% DTI and giving lenders incentives to do so.  So, if you are not running high DTI, it may not be the best bet.  Again, I am not 100% on any of this that is just what they keep saying on TV and on the boards here.

[Paul1876]

>From what I saw, it it based on getting mortgage payment to 31% DTI and giving lenders incentives to do so.  So, if you are not running high DTI, it may not be the best bet.

This is what caused my confusion. This is a feature of the Home Affordable Modification program. If you have a "high" DTI ratio, it could trigger a further reduced APR. In addition, there are "on time" payment bonus from the government. But the qualifications seem to stipulate you are either delinquent or in imminent danger of delinquincy, but able to afford the modified loan. Depending on interpretation, I might qualify for this as well, but wouldn't consider it it it could have a negative impact on my credit. Certainly intentionally skipping a payment to qualify is not an option, but officially late payments doesn't seem to be a "requirement"

Are you having trouble paying your mortgage?
For example, have you had a significant increase in your mortgage payment OR reduction in your income since you got your current loan OR have you suffered a hardship that has increased your expenses (like medical bills)?

 Of course, this is open to the banks interpretation, and they could easily feel you aren't in hardship until you've missed a payment. How they feel likely has a lot to do with how the program is structured, tha back end stuff I haven't seen details on yet. If the bank is bearing a lot of the "modifcation" costs, they are likely to approve only a few, if its getting passed back to Freddie Mac they will likely be more open to the program since it reduces their risk.

[Anonymous]

Is your current payment more than 31% DTI?

What is your current interest rate?

If they did a refi to a 30 year fixed at say 4% would you be at 31%.   If not, how much higher would you be.

There are on time payment bonuses (to both the laon company and directly to the pricple of the loan itself) in some circumstances....

For us to give you much help we need more info on the actual mortgage you have, the rate, and the income.

[Anonymous]

Also, the balance on the 2 loans. 

[Paul1876]

Is your current payment more than 31% DTI?

   Yes.

What is your current interest rate?

   6.875%on primary, 4.125 on HELOC currently

Not sure what income to list. AGI from Tax year 2008? Salary from paystubs before 401k deductions?

The ARM has been moving downward, so the debt to income isn't as high as it was when I originally financed. The mortgage is interest only 1st 10 years, then adjusts to pay off princple after a total of 30 years, I'd really like to get into a "normal" 30 year loan(plus my HELOC, not sure I can get a better deal on that right now). I'm not comfortable posting salary details and details of loan ammounts to a public forum, but I'm quite capable of doing the math myself if I can decipher what numbers to use, mortgage, mortgage plus escrow, 1st & second plus escrow, etc.

My biggest concern was that attempting to participate in the program might taint by FICO, since I'd be claiming to be "at risk for default", then claiming to be a good credit risk if not approved and I opted for a simple refi. So if "Home Affordable" = Bankruptcy, its a non-starter, if it = Student Loan.then I'm all for applying.