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house-web2RISMEDIA, February 25, 2009-(MCT)-Wondering if you’re one of the many homeowners who will be affected by the housing plan? Here are several scenarios that would place you as someone who could get help:

– If your home value has dropped, your mortgage balance now exceeds 80% of the loan value, and your mortgage is guaranteed by Fannie Mae or Freddie Mac.
– If you have a subprime loan and cannot afford your payments.

Situation 1

My home value dropped, and now my loan balance exceeds 80% of its value.

You may be “underwater,” owing more on your home than it is now worth. You can’t refinance it. You can’t sell it without taking a big loss.

Until now, Fannie Mae and Freddie Mac, the recently nationalized companies that guarantee loans for millions of homes, could not guarantee refinancing for mortgages valued at more than 80% of a home’s value. The government is removing that restriction on loans Fannie and Freddie own or guarantee. You can refinance at a lower rate.

Say you have a 30-year fixed-rate mortgage of $207,000 on a $260,000 home at a 6.5% interest rate. You still have $200,000 to pay, but the home value has sunk to $221,000. You could refinance at 5.16% today and save about $2,300 a year, the White House estimates.

There’s a limit: You won’t qualify if you owe more than 5% more than your house is worth.

Situation 2

My subprime loan costs me more than I can afford to pay.

If your lender receives government financial assistance, Obama will require it to work with you to reduce your burden. Even if your lender receives no such assistance, you might get help, though that’s not yet certain.

Say your payments add up to about 43% of your monthly income. Your lender must bring down interest rates so your monthly mortgage payment is no more than 38% of your income. Then, the government and your lender will equally contribute to bring your payment down to 31% of income.

If you have a $220,000 mortgage, that could cut your monthly payments by more than $400, the White House says.

The lower interest rate will be kept in place for five years. After that, it will gradually rise again to the old loan rate.

You’ll also get $1,000 each year for five years if you stay current on your loan payments during the five-year period of government help.

The Treasury Department is developing guidelines for loan modifications. Obama said they will be made public within two weeks. One decision is already made, the Washington Post reports: You won’t get help unless your mortgage consumes at least 38% of your income.

Key Points About These 2 Plans

How many homeowners will they help?

The refinancing-rule relaxation could help up to 5 million homeowners, and the subprime-loan interest-rate reduction up to 4 million, Obama says.

I own multiple homes for income, and they have lost value. Can I get help, too?

No. But other government efforts aimed at lowering mortgage interest rates might make it practical to refinance your loans at lower rates.

I pay a lot more than 43% of my monthly income in mortgage payments, and I have fallen far behind. Will this plan help me?

Possibly not. Guidelines are still being developed, but Obama said the plan “will not reward folks who bought homes they knew from the beginning they would never be able to afford.”

Why should lenders reduce the burden of my subprime loan?

They might not. The plan is voluntary, unless your lender receives government financial aid. Some private mortgage investors have threatened to sue banks and companies that service mortgages if they take part. But participants will receive government incentive payments. And Obama is pushing for Congress to change bankruptcy law to let judges reduce mortgage amounts on primary residences to their fair-market values as an alternative to foreclosure. That could provide another reason for your lender to work with you.

Copyright © 2009, The Idaho Statesman, Boise
Distributed by McClatchy-Tribune Information Services.