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Affordable Home Mortgage: Home Mortgage Refinancing From the Obama Stimulus
Taking advantage of President Obamas “Making Home Affordable” plan is easy. This plan will allow homeowners all over to get a home mortgage refinance or modification into a fixed rate 2% home loan. This stimulus plan will save millions of homeowners hundreds of dollars every single month. Here is how it all works:
Who Can Apply For a Loan Modification Through CitiMortgage and CitiBank? To apply for a loan Modification through Citi, borrowers will need to have obtained their loan before January 1st, 2009 and use the home as their primary residence. The loan must also have a balance of $729,750 or less, and the monthly mortgage payments must be over 31% of a homeowner’s pre-tax monthly income.
Once the lender reduces mortgage payments to no more than 38% Front-End Debt-to-Income ratio, the Federal Government will match further reductions in monthly payments down to 31% Front-End Debt-to-Income ratio for the borrower. At this point, lenders may capitalize arrearage. The target Front-End Debt-to-Income (DTI) is 31%. The Standard Waterfall step that results in a Front-End DTI closest to 31% without going below 31% will satisfy the Front-End DTI Target. Front-End DTI is the ratio of PITIA to Monthly Gross Income. Gross Monthly Income-the amount before any payroll deductions. The total first mortgage debt and monthly payments (PITIA). This includes principal, interest, taxes, insurance, and homeowners association and/or condominium fees. The calculation to reduce the interest rate to reach the Front-End DTI Target is subject to a floor of 2%. The rate reduction shall be made in increments of 0.125%, with the goal of bringing the monthly payment as close as possible to the Front-End DTI, without going below 31%.
If the modified interest rate is at or above the highest allowed by the original mortgage note, the modified interest rate will be the new note rate for the remaining loan term. If, however, the modified interest rate is below the maximum allowed rate in the note, the modified interest rate will be in effect for the first five years, followed by annual increases, until the interest rate reaches the interest rate cap, of up to 1% per year. The interest rate will be fixed once the it reaches the interest rate cap. If the Front-End Debt to Income target has not been reached, the term of the loan shall be extended up to 40 years
Additionally, when going through the application process, borrowers should be careful to correctly document their income vs. their expenses. Lenders generally do not want to give a modification to those that earn too little or too much income. If this is the case, a borrower can be denied and will either have to eliminate expenses or increase their income before they can be accepted into the program. While this may make the loan modification process difficult, Citi is committed to helping homeowners correct their financial situation, by allowing modifications that benefit their borrowers, as well as themselves.