In 2009, the Obama Administration created a plan to help the American economy recover from a serious financial crisis. Part of that plan included stabilizing the troubled housing market and reduce the amount of foreclosures. The Making Home Affordable program was introduced to help struggling home owners avoid defaulting on their loans, including FHA mortgages and equivalent programs for VA home loans.
Under the Making Home Affordable program, several loan modification and refinancing options became available. Those with FHA loans who qualify for help under these programs have many options to save the home, prevent foreclosure and get back on track with their mortgage payments.
But with any new program or set of programs, the terms can be confusing. With so many options available, struggling home owners sometimes feel their biggest challenge is getting into the right plan.
Under Making Home Affordable there are refinancing plans where eligible borrowers can get into more affordable monthly payments and lower interest rates. Home Affordable Refinance plans are intended for those who are current on their mortgage payments. Those who haven’t been more than 30 days late on a payment in the last 12 months qualify for Home Affordable Refinance plans.
Home Affordable Modification Programs are different; borrowers are eligible when they got their FHA mortgage or conventional home loan prior to January 1, 2009, and are “currently in trouble” making payments. “Trouble” can be qualified in many different ways–a sudden increase in mortgage payments on variable rate loans, a work-related hardship where a sudden reduction of income causes financial difficulty, and/or other qualifying circumstances apply.
FHA loan modification is different than refinancing. In many cases a portion of the original loan may be forgiven and the terms of the loan may be renegotiated or otherwise altered to help the borrower stay in the home and avoid foreclosure. Compare that to refinancing, which is a new contract and new terms. There’s nothing wrong with either course of action, much depends on the needs of the borrower and whether their circumstances allow them to participate in a particular Making Home Affordable program.
Each program under Making Home Affordable has its own terms, requirements and expiration dates. It’s not safe to assume these programs will be around indefinitely for those who might need them in the future; many are already set to expire unless new legislation is passed to extend them. If you need help, now is the time to act.