What the Plan Will Not Allow:

The automated valuation cannot show the home over 105% of the current loan amount, 110% in certain cases.

 The borrower must be employed and cannot have become self-employed in the last 2 years.

 The refinance must show a benefit to the borrower by lowering rate and payment or taking the borrower from an adjustable rate mortgage or pay option ARM to fixed program.

*Also note the program will not allow a borrower to refinance second mortgages and cash out refinances are not allowed. 

Lender participation is voluntary and each lender’s approach will differ slightly, but requesting your current lender’s version of the “Making Home Affordable” plan should be enough to let your lender know the specific program you’re interesting in exploring.

It appears lenders are rolling out this program in phases. The first phase pertains to the refinancing of 30/20/15/10 year fixed mortgages for the majority of lenders. Some lenders, but not all, added the 5/7/10 year adjustable rate mortgages. The mortgage loan is basically a streamline refinance, but with the added advantage of no appraisal. In this economic atmosphere of declining market values and rampant job losses, it allows a much lower monthly payment and a substantial monthly savings.  

Government VA and FHA home loans always did and still allow the Interest Rate Reduction Loans with no appraisal except under certain circumstances.

Borrowers currently in an FHA or VA loan should use this option as the stimulus plan cannot make the change from a government loan to a conventional conforming program and FHA and VA loan rates are comparable to conventional conforming rates. No "cash out" is allowed on the "Making Home Affordable" plan, but with rates dropping to below 5% from a median 6.5% six months ago, it is translating to sizable monthly savings for most refinanced mortgages.

Paying points will allow an even lower rate, but a borrower should plan to remain in the home long enough to recoup the cost of the points paid. Each point represents 1% of the loan amount. The closing costs may be added into the loan and refinanced as well so that no out of pocket charges will be incurred by the borrower, however, a borrower has the choice of paying closing costs at the closing table or rolling them into the mortgage loan. 

Rates for loans less than the 30 year term are less attractive. It appears lenders are more interested in locking in a long term borrower than a short term one. Adjustable rate mortgage loans, 20, 15 and 10 year terms give no measurable break in rate from a 30 year fixed. It is suggested a borrower refinance on a 30 year term, but make the payment they wish above that based on the payment for the term they wish.

It is unknown how long this program will be in play, but it is widely anticipated not to be for too much longer due to the no appraisal option. Contact your current lender for information specific to your mortgage loan and refinancing tips.

Mortgage Refinance 2010