2% Mortgage Rates

Published by julia | Filed under Buyer / Seller Tips, Miscellaneous, Real Estate, Shout Outs, Uncategorized

Some of the 3 to 4 million homeowners eligible for loan modifications could see interest rates as low as 2 percent under Obama’s administration’s new Making Home Affordable initiative.

Originally named the Homeowner Affordability and Stability Plan, it now contains a provision to modify mortgages for qualified homeowners struggling to make that monthly payment.A loan modification, changes the terms of the existing loan without writing a new one. Modifications are designed to make mortgages more affordable.

Also called a workout, this provision is open to anyone including those who haven’t missed payments, but may be likely of missing payments in the future.

The modification plan is open to anyone with any loan that has a balance under Fannie Mae and Freddie Mac limits, which now as high as $729,750. The modification program, comes with financial incentives for both homeowners and lenders.

Loan servicers get thousands of dollars for modifying mortgages and borrowers get a principal reduction for thousands of dollars over five years for making payments on time.

MHA modifications are designed to make the monthly cost of housing more affordable by reducing the mortgage payment to as little as 31 percent of the household income. Lenders can accomplish that by reducing interest rates, extending the life of the loan and even reducing the principal.

The program runs through 2012, which allows borrowers to modify a loan only one time and applies only to loans made on or before Jan. 1 2009. Mortgages for single-family homes worth more than $729,750 are excluded.

MHA also includes a refinancing provision for those with loans held by Fannie Mae or Freddie Mac.

Homeowners with less than 20 percent equity in their homes, who find it difficult if not impossible to refinance, may be eligible to get new loans at lower rates provided the new note doesn’t exceed 105 percent of the home’s value.

The refinanced loans can be as large as $729,750 in high cost areas and go to those who are current and on time with their payments.