President Obama discussing mortgage programs.

Recognizing that the Housing Crisis is one of the most important challenges to the recovery of the American economy, the Obama Administration introduced a plan to help struggling home owners avoid foreclosure and stay in their homes.

The program, Making Home Affordable, is designed to help homeowners restructure their loans – either by modifying their mortgages under the Home Affordable Modification Program, providing refinancing opportunities for Fannie/Freddie mortgages with the Home Affordable Refinance Program, modifying their second mortgages with the Second Lien Modification Program (2MP), providing mortgage forbearance for the unemployed under the Home Affordable Unemployment Program (UP) – or, when a homeowner can’t afford to stay in their home, provide help avoiding foreclosure by transitioning to more affordable housing with the Home Affordable Foreclosure Alternatives Program.

Each of programs have specific eligibility requirements described more fully below.

Home Affordable Refinance Program (HARP)

The Home Affordable Refinance Program is a program designed to help creditworthy homeowners who are committed to paying their mortgage refinance their home into a more affordable loan. To be eligible for HARP, your home must be your primary residence (up to a four unit building) and your loan must be conforming (see below) and owned or guaranteed by Fanny/Freddie. You must also be current with your mortage payments and the first mortgage cannot exceed 125% of the fair market value of your home. Finally, you must have the financial ability to make the payments on the refinanced mortgage.

To find out if your mortgage is owned or guaranteed by Fannie/Freddie, use the following contact information -

For Fannie Mae – you can call 1-800-7FANNIE (8am to 8pm EST) or go online to www.FannieMae.com/loanlookup

For Freddie Mac – you can call 1-800-FREDDIE (8am to 8pm EST) or go to their website at www.FreddieMac.com/mymortgage

A conforming loan for most areas of the United States meets the following criteria -

Single-family homes: $417,000            Two-unit properties: $533,850
Three-unit properties: $645,300         Four-unit properties: $801,950

Four areas of the country – Alaska, Hawaii, Guam, and Puerto Rico – are designated as high cost areas and have higher conforming loan limits. Also, since 2008 certain areas of the contiguous US are subject to higher conforming loan limits for single family homes only. The Federal Housing Finance Authority page on high cost areas provides further detail.

Below are the conforming loan limits for the high cost areas -

Single-family homes: $729,750             Two-unit properties: $934,200
Three-unit properties: $1,129,250        Four-unit properties: $1,403,400

How to Apply for HARP

To apply for the HARP program, you should first review the eligibility requirements and see if you think you may be eligible. Next, contact your lender (or any other servicer authorized to conduct business with Fannie/Freddie) and ask them for a HARP application form. You should be prepared to produce the following information -

• information on your first mortgage (and second mortgage if you have one);
• a copy of their most recent tax return on file and likely a Request for Transcript of Tax Return: Form 4506-T from the IRS;
• copies of recent pay stubs or, if self-employed, provide verifiable income documentation like business paychecks or bank deposits;
• information on your current financial situation including assets (like savings accounts or other assets) and your liabilities (like credit card balances and payments, car loans, student loans.

The Home Affordable Refinance program expires in June 2011. If you do not meet the HARP minimum eligibility requirements, you may wish to look into other mortgage programs administered by the Federal government described below. At the least, you should contact your mortgage servicer to discuss other options.

Home Affordable Modification Program (HAMP)

This program help eligible homeowners modify their mortgages to make them easier for them to afford. The program is intended for people who have suffered some hardship that has either reduced your income or increased your expenses so that you are struggling with your mortgage. To be eligible for the program, your home has to be your primary residence, the amount you owe on your first mortgage must be less than $729,750 (for single units, higher for multi units – see conforming, high cost areas above) and your payment amount must be greater than 31% of your gross income, and, lastly, you have to have originated your mortgage prior to January 1, 2009.

To find out if your mortgage is owned or guaranteed by Fannie/Freddie, use the following contact information -

For Fannie Mae – you can call 1-800-7FANNIE (8am to 8pm EST) or go online to www.FannieMae.com/loanlookup

For Freddie Mac – you can call 1-800-FREDDIE (8am to 8pm EST) or go to their website at www.FreddieMac.com/mymortgage

How to Apply for HAMP

Homeowners who feel they they meet the minimum eligibility requirements for the HAMP program should either contact the government-run Homeowner’s HOPE™ Hotline at 1-888-995-HOPE (4673) to talk to a government housing counselor at no cost OR go to the Making Home Affordable website to download an “Initial Package” of application forms and documentation. Once the forms are completed, you should send them to your mortgage servicer.

The “Initial Package” of application forms and documentation includes the following -

• a Request for Modification and Affidavit form which provides information to your mortgage servicer about your home and financial situation;
• a Request for Transcript of Tax Return: Form 4506-T which authorizes the servicer to request your tax return from the IRS;
• a list of information required as Proof of Income which includes your two most recent pay stubs showing year-to-date income or, if self-employed, your most recent quarterly P/L statement. If on disability, social security, unemployment, collecting public assistance or a pension, a copy of benefits statement and two most recent bank statements showing receipt of benefits.

You can download the “Initial Package” of application forms and documentation here.

Once approved for a loan modification, a homeowner must complete a three or four month trial under the modified terms of the mortgage to show that they can meet their new payment. The modification agreement will only become permanent after meeting the payment obligations for the trial period.

The Home Affordable Modification program expires in December 31, 2012.