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Questions address foreclosure relief

Wondering if you qualify for help under the Obama administration’s new foreclosure relief plan?

Here’s a series of questions and answers from McClatchy Newspapers that should help you figure it out.

Q: Do I qualify?

A: Your mortgage must predate the start of 2009, you must live in the home, and you’ll have to provide proof of income. Then ask two questions. First, are you already behind on payments or even in the foreclosure process? If the answer is no, then ask yourself whether your current mortgage rate is high enough to make it worth your while to refinance to take advantage of today’s low rates for 15-year and 30-year fixed-rate mortgages.

Q: That’s it?

A: No. If you think it’s advantageous to refinance, you must find out who owns your loan. Most mortgages are bundled together and sold into a secondary market, where investors technically own them. If Fannie Mae or Freddie Mac placed your loan into the secondary market, you can contact the company that sends your monthly mortgage statement to discuss the new program. If your mortgage is in the portion of the secondary market where the private sector issued the mortgage-backed securities, you don’t qualify.

Q: How do I know who owns my loan?

A: You’ll have to ask the company that sends your monthly statement.

Q: What if my loan is owned by Fannie or Freddie but I have negative equity?

A: To qualify under the refinance portion of the Obama plan, you can owe up to 5 percent more than your home is now worth.

Q: What about those of us who are about to lose our homes?

A: A lot will depend on whether the mortgage bill collectors, the servicers, think they have leeway from investors to modify the loans. They’re being offered an upfront fee of $1,000 and will get “pay for success” fees for three years if a borrower’s modified loan remains in good standing. They’re being offered even more fees if they get homeowners into this program before they fall behind on payments.

Q: What happens if the servicer agrees to modify my mortgage?

A: First, the servicer has to get your monthly payment down to 38 percent of your monthly after-tax income. It can do this by taking a loss on the loan or stretching a 30-year loan into a 40-year, for example. It’s allowed to reduce interest rates as low as 2 percent.

Once the 38 percent threshold is met, the government matches lenders dollar for dollar to get the payment even lower, to 31 percent of monthly after-tax income.

Q: Is the modification a permanent fix?

A: The new interest rate would be valid for five years. Afterward, it can rise 1 percent a year until the lending rate hits the conforming loan survey rate at the time of the modification.

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