Mr. Obama has been given the daunting task of reviving the nations economy. The main concerns on most Americans minds is that of the precipitous position of their mortgage and home values.
In an effort to pacify his constituents, Mr. Obama rolled out the Home Affordable Modification Program March 4.
The structure is sound…unfortunately the reality is unrealistic for many Americans.
Why is it unrealistic?
1. Your current homes value (Current Market Value / CMV) cannot exceed 105% of your primary (1st) mortgage.
ex: A. Your homes value is $400,000.
B. Your Mortgage amount cannot be higher than $420,000 or you will not qualify
2. No reduction in principle.
3. A 3 tiered process to achieve a 31% Debt To Income (DTI).
Step 1. Your mortgage company will reduce your interest payment down to 2% for a period of 5 years or longer.
If that doesn’t get you to 31% DTI…then
Step 2. Your mortgage company may extend the term of your mortgage up to 40 years.
If that doesn’t work…
Step 3. Your mortgage company will “forebear” and amount of your loan to get you to 30% DTI
ex: You owe $400,000. However, to get you to 31% DTI, your mortgage company must “forebear” $75,000.00 till the end of your qualifying period…it could be from 5 years (most likely) to 40 years. At the end of that period, you will have a balloon payment due of $75,000. Yes…you have to pay the $75,000.00 back…no options. If you sell the property, you must pay it back…even if there is not enough to cover the amount. That could be disastrous for many Americans.
No Free Rides Here!!!
More to follow!
As always,
Best,
Kris
call me if you want to discuss 714-615-7605
