ARRA 2009 - Important Details, Effective Date

ARRA Brings New Opportunity To Refinance or Modify

There has been an overwhelming amount of noise and confusion since the American Recovery and Reinvestment Act of 2009 (ARRA) was announced a few weeks ago. As a follow up to my message from 2/24, below is an summary of the recently released details, some resources to help you figure out if this will benefit you, and some instructions on what steps you should take next. If you think this information is useful, please pass it along. Feel free to forward this email to anyone you know that may be impacted.



The Making Home Affordable government program is divided into two parts:

· Modification Program

· Refinance Program


Despite all the fanfare surrounding this program, it remains 100% VOLUNTARY, and mortgage servicers (the companies that actually collect borrowers’ mortgage payments) are not obligated by law to follow these rules and guidelines...yet. Oddly enough, even if a financial institution has already received assistance with government funding, they are NOT obligated to participate. However, if a financial institution receives new or more government funding in the future, they WILL be obligated to participate.



In other words, the rules are still a bit unclear and nobody really knows who will participate and how it will all work from a practical perspective. Most of what you read and hear about in the media will most likely be speculation at this point. In a nutshell, the program has three elements:

· The government is offering financial incentives to mortgage servicers who modify loans for borrowers.

· The government is offering financial reimbursement to investors if they allow servicers to modify loans and then take a hit on the borrower’s re-default if the property declines in value after the loan modification

· The government is offering financial incentives to borrowers who modify their loans and make their new payments on time



Vacation homes and investment properties don’t qualify for the program. Only borrowers who have experienced some type of financial hardship can qualify. Click on this link if you want to see if you qualify for at least the minimum requirements.




Remember, even if you do qualify under these minimum requirements, your servicer (the company where you send your payments) might not be participating in the program just yet.




Part 2 - Refinance Program


Here’s how it works:

· You need to be current on your mortgage payments (no late payments in the last 12 months)

· Your mortgage balance cannot exceed 105% of the current value of your home

· Your mortgage needs to be owned or guaranteed by Fannie Mae or Freddie Mac

o This may include Alt-A or even sub-prime mortgages



Based on current market conditions, this might make sense for you if:

· You have an adjustable rate, interest only, or balloon mortgage that you want to convert into a fixed rate; or,

· You have a fixed rate mortgage where the interest rate is greater than 5.500%.



Important Dates

· This program becomes effective on APRIL 4. Prior to that date, you can, and should begin the process of gathering required documentation. Please contact me to get this process started.

To find out if your mortgage is owned/guaranteed by Fannie Mae, click here.

To find out if your mortgage is owned/guaranteed by Freddie Mac, click here.


Other Recent Developments


There have been many other recent developments in the markets, as well as new government legislation. Here are just a few recent items that may impact you or someone you know:

· Home improvement tax credit

· First-time home buyer tax credit (Federal)

· New construction home purchase tax credit ( California primary residences)

· Reverse mortgages for home purchase transactions (age 62 or older)

· Suspension of required minimum distributions for certain retirement accounts (age 70 ½ or older)



Let me know if you’d like to discuss any of these items in further detail by sending a quick email.