The housing aid plan

The housing aid plan

Between the $75 billion foreclosure plan President Barack Obama revealed on Wednesday and the $787 billion economic stimulus he signed a day earlier, the government is promising a range of programs aimed at getting new help to homeowners.

But not everyone who needs help will get it. Homeowners who are severely "under water" in their mortgages — owing more than the value of their homes — won't get anything.

So who does qualify for the assistance? What exactly will they get — and when will they get it?

Here are some questions and answers about the latest round of aid for homeowners:

Q: Who will benefit from the Obama administration's plan?

A:The plan is designed to help two kinds of homeowners. The first are people who took out prudent mortgages with a substantial down payment and have been making their payments, but who have little or no home equity left because of falling housing prices. In the second group are borrowers struggling to make their monthly payments but able to make them if they were reduced.

Q: What if I'm a homeowner on the brink of foreclosure?

A: Homeowners who are behind on their mortgage payments or who are struggling to keep current may qualify for a mortgage modification under the Homeowner Affordability and Stability Plan that Obama unveiled Wednesday.

To qualify, the house must be your primary residence, your mortgage payment must be greater than 31 percent of your monthly gross income and your loan mustn't exceed current Fannie Mae and Freddie Mac loan limits, which vary by region and max out at nearly $729,750.

Owners of two-, three- and four-unit properties are eligible as long as they live in one unit as a primary residence. Only first mortgages are eligible for a modification.

More detailed requirements will be available March 4.

Q: What if I'm not near foreclosure? Do I get any assistance?

A: Borrowers who are current on their mortgages but can't refinance into lower interest-rate loans because their homes have fallen in value are eligible to refinance into a 30- or 15-year, fixed-rate loan under the plan, but only if their loan is held by mortgage finance companies Fannie Mae or Freddie Mac.

To qualify, homeowners can't owe more than 105 percent of their home's current value on their first mortgage. For example, if your home is worth $100,000, your first mortgage can't exceed $105,000.

Borrowers with a second mortgage are eligible as long as their first mortgage isn't more than 105 percent of their home's value. The value of your property will be determined after you apply to refinance.

Skeptics say it's going to be difficult for borrowers to figure out whether their loan is held by Fannie or Freddie. "I'm not sure people are always going to get a straight answer," said Bert Ely, a banking industry consultant in Alexandria, Va.

Q: What if I'm already in foreclosure?

A: It is up to your lender to decide whether it wants to participate in the program. The Obama plan increases the financial incentives for lenders to participate.

Q: What if I declare bankruptcy?

A: Currently, bankruptcy law does not permit judges to modify the terms of mortgages for borrowers in bankruptcy. The Obama administration wants Congress to amend the law to give judges that power, but many lawmakers oppose the idea.

Q: How are these programs different from what is already available?

A: Unlike foreclosure-prevention efforts, the new programs are available to people who aren't yet behind on their payments. In fact, in the loan modification program, the government will pay mortgage servicers a higher incentive fee — $1,500 instead of $1,000 — if they modify a loan before a borrower goes into default.

Q: Isn't this just rewarding people for making bad decisions and irresponsibly getting in over their heads?

A: The Obama administration says the loan modification plan will exclude speculators and borrowers with high debts.

Q: Any breaks for first-time home buyers?

A: Under the economic stimulus plan that Obama signed Tuesday, first-time home buyers who purchase a home between Jan. 1 and Dec. 1 will be eligible for a tax credit of 10 percent of the value of the home, up to $8,000.

Homeowners don't have to pay back this credit over the next 15 years, the way they had to with the $7,500 tax credit enacted last summer. However, home buyers would have to repay the credit if they sold their homes within three years.

First-time buyers are defined as those who haven't owned a house for at least three years.

Q: Any other breaks for current homeowners?

A: Homeowners also can get a tax credit of up to $1,500 by making their homes more energy-efficient this year or next. Many projects qualify, such as installing energy-efficient windows, doors, furnaces or air conditioners, or adding insulation. Homeowners can get back 30 percent of their expenses, up to $1,500.

Q: Will there be more assistance down the road?

A: The Obama administration is working with lawmakers to pass a bill that will allow bankruptcy judges to modify the terms of primary home loans in court.

The lending industry is fighting this plan, arguing that it will make lending a risky proposition in the future. But with support mounting, the industry's efforts are primarily focused on limiting the scope of the bankruptcy proposal, rather than blocking it completely.

Q: How soon can I expect to take advantage of these benefits or aid?

A: The refinancing and loan modification programs start March 4. The first-time homeb uyer tax credit is in effect from the first of the year through the end of November. The "green" home tax credit applies to energy-efficient improvements made through 2010.

Q: What should I do until March 4?

A: If you're interested in refinancing or applying for a loan modification, collect all necessary documents to give to your lender.

These include your most recent pay stubs and/or other documents detailing the income you receive, your most recent tax return, information about your second mortgage if you have one, payment information on your credit cards if you carry a monthly balance and payment information on all other loans, like student loans and car loans.

Q: What if I'm facing foreclosure now, and can't wait until March 4?

A: Contact your mortgage servicer or mortgage lender. Many lenders said they will postpone foreclosure sales on home loans that could qualify for the modification.

Some questions and answers from the Los Angeles Times were included in this article.

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