Under traditional rules, homeowners who owe more than 80 percent of their home's value cannot easily refinance their mortgage. Many homeowners who have paid money down and are current on their monthly payments have seen their home's value drop enough that they lack the necessary equity to qualify for refinancing.
Under the Housing Affordability and Stability Plan, qualifying homeowners would be able to refinance their mortgages to current rates, making monthly payments more affordable. For those borrowers who are currently facing high rates following an ARM reset, the plan offers a chance to switch to a lower fixed rate mortgage.
Who Qualifies - In order to qualify for this portion of the plan:
- Borrowers must have mortgages guaranteed by Fannie Mae or Freddie Mac.
- Homeowners must owe more than 80 percent of their home's current appraised value.
- Homeowners must not owe more than 105 percent of the home's current appraised value.
- Borrowers must be current on monthly mortgage payments.
Homeowners with second mortgages will also be eligible but with additional restrictions. Along with the 105 percent limit, borrowers must be able to prove that they can still meet payment terms on the original loan and the lender must agree to keep the original loan in "primary position" in terms of monthly payments.
Who Doesn't - While some details of the plan have not yet been released, initially it appears that the following groups of borrowers may not qualify for this portion of HASP:
- Borrowers who owe significantly more money than their home is worth.
- Most borrowers whose mortgage exceeds the $417,000 conforming limit.