Wondering where your piece of the Stimulus Package is?

New mortgage programs with logical and less restrictive guidelines may have the most direct effect on your personal bottom line.

In northern Michigan, like most of America, we've seen the mortgage lending pendulum swing from requirements that were so relaxed anyone who could hold a pen in his hand could get a loan (which helped create the mess we're in); to the restrictive guidelines that would make someone as qualified as Warren Buffett wonder if he could get a loan (which has helped prevent us from fixing this mess).

Thankfully, cooler heads are now prevailing and we're seeing some common sense in the new programs designed to aid the real estate market during these trying times…Interested in buying a home? There's a great tax credit available. Fallen behind on your mortgage payments? Contact your current lender and ask about the new "Loan Modification Program." These are great options for citizens who can use the help.

But perhaps the most far-reaching program for Joe Average is the Home Affordable Refinance. Recently rolled out by the Obama administration, this plan is a common sense solution that will reward home owners who are current on their mortgages and give them a chance to refinance at lower rates even if they've lost significant equity in their house over the last couple years.

In the recent past, the biggest road block for even the most qualified loan applicant was that their home value had dropped to a point that when they tried to refinance, their new Loan to Value (LTV) had gone above the magical 80 percent threshold; this would require them to pay Private Mortgage Insurance (PMI) as a result. That new monthly PMI payment would usually wipe out any benefit of refinancing, so the homeowner was stuck with the mortgage they had.

The Home Affordable Refinance plan hopes to remedy this scenario.

Here are some details…

– It's a Fannie Mae to Fannie Mae

loan. Fannie Mae must hold your

current mortgage. (Freddie Mac has a

similar program soon.) Not sure who

holds your current mortgage? Check

these links to see…

Freddie: www.freddiemac.com/corporate/

Fannie: loanlookup.fanniemae.com/loanlookup

– Up to 105 percent LTV. This means

you can refinance up to 5 percent more

than your home's appraised value. The

obvious question is, "Isn't that the kind

of thing that started all this?", but keep

in mind this is a Fannie to Fannie

refinance. They already hold the

mortgage and are already "under water"

with you. Their logic is something like

this, "if you've been able to make your

current payment, then you should be

able to make a lower payment so go

ahead and refinance if it will help your

monthly cash flow."

– No minimum credit score. As long as you're current on your mortgage, you

will likely qualify with any credit score.

However, as with any mortgage today,

your score will help determine your

upfront fees. The better your score; the

fewer the upfront fees.

– Private Mortgage Insurance (PMI).

If you are currently paying PMI and you

refinance to an LTV greater than 80

percent, you will still pay the same or less

PMI. If you currently do not pay PMI,

you will not have to pay PMI regardless

of your new LTV.

Some program limitations:

– Limited Cash Out. Although you can

roll your closing costs and escrows into

the new loan, you are allowed to receive

no more than 2 percent of the loan size

up to $2,000 at the close.

– No combining 1st and 2nd


This means if you have a HELOC or

2nd mortgage you won't be able to roll it

into the new mortgage. It will have to

remain a separate loan.

– Debt to Income Ratio. You must still

qualify with documented income and

show you can afford the new payment.

This is an excellent program to reward those that have managed to keep current on their mortgage payments. To see if you qualify, contact an approved mortgage lender for details.

Dave Durbin is a licensed Mortgage Broker and founder of Bay Mortgage in Traverse City. BN