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When You Owe More than Your Home is Worth

In today’s housing market, many homeowners have experienced a decrease in their home’s value. These Making Home Affordable programs are designed to help homeowners with “underwater” mortgages.

If you have additional questions about getting mortgage help, contact one of our housing advisors at (888) 995-HOPE (4673). These HUD-approved housing counselors will help you understand your options, design a plan to suit your individual situation, and prepare your application. Research shows that homeowners who work with housing counselors like these are more successful and have better long-term outcomes. There is no cost to you for this valuable, around-the-clock service. Help is available in more than 160 languages.

Principal Reduction Alternative (PRA)

PRA was designed to help homeowners whose homes are worth significantly less than they owe by encouraging servicers and investors to reduce the amount you owe on your home.

Eligibility

You may be eligible for PRA if:

  • Your mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac.
  • You owe more than your home is worth.
  • You live in the home carrying the mortgage you want to modify.
  • You obtained your mortgage on or before January 1, 2009.
  • Your mortgage payment is more than 31 percent of your gross (pre-tax) monthly income.
  • You owe up to $729,750 on your 1st mortgage.
  • You have a financial hardship and are either delinquent or in danger of falling behind.
  • You have sufficient, documented income to support the modified payment.
  • You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

Program Availability

More than 100 HAMP SM-participating servicers are required to evaluate homeowners for principal reduction.

Participating servicers are required to develop written standards for PRA application. The largest servicers include Bank of America, CitiMortgage, JP Morgan Chase, and Wells Fargo.

Program Effective Date

Effective Oct. 1, 2010 – Dec. 31, 2012.

FHA Refinance for Borrowers with Negative Equity (FHA Short Refinance)

If you are current on your mortgage, but owe more than your home is worth FHA Short Refinance may be an option that your mortgage servicer will consider. FHA Short Refinance was designed to help homeowners refinance into more affordable, more stable FHA-insured mortgage. If your current lender agrees to participate in this refinance, they will be required to reduce the amount you owe on your first mortgage to no more than 97.75% of your home’s current value.

Eligibility*

You may be eligible if:

  • Your mortgage is not owned or guaranteed by Fannie Mae, Freddie Mac, FHA, VA or USDA.
  • You owe more than your home is worth.
  • You are current on your mortgage payments.
  • You occupy the house as your primary residence.
  • You qualify for the new loan under standard FHA underwriting requirements.
  • Your total debt does not exceed 55% of your monthly gross income.
  • You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

*Eligibility criteria are for guidance only. Contact your mortgage servicer to see if you qualify for FHA Short Refinance and FHA2LP.

Program Availability

  • Participation of mortgage servicers is voluntary.
  • Contact your servicer, the company to which you send your mortgage payments, to determine whether the servicer is participating.

For More Information

With questions about FHA Short Refinance, contact the FHA National Servicing Center at (877)622-8525 or visit their website.

Program Dates

Effective Sept. 7, 2010 – Dec. 31, 2012.

Home Affordable Refinance Program (HARP)

If you are current on your mortgage and have been unable to obtain a traditional refinance because the value of your home has declined, you may be eligible to refinance through HARP. HARP is designed to help you refinance into a new affordable, more stable mortgage. The HARP loan is a new loan and will require a loan application and underwriting process. Loan refinance fees will apply.

Eligibility*

You may be eligible to apply if you meet all of the following:

  • Your mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
  • The mortgage must have been sold to Freddie Mac or Fannie Mae on or before May 31, 2009.
  • The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May 2009.
  • You must be current on your mortgage at the time of the refinance with a good payment history over the last twelve months.
  • The current loan-to-value (LTV) ratio must be greater than 80%.

*Eligibility criteria are for guidance only. Contact your mortgage servicer to see if you qualify for HARP.

Program Availability

The HARP program is offered by many servicers. Homeowners should check with their mortgage servicer (the company to which homeowners make their mortgage payments) to determine if they are participating in HARP. If their mortgage servicer is not participating, the homeowner may contact other lenders that participate in HARP to determine if they are eligible for a refinance.

For More Information