News for Prescott AZ - AmericanTowns.com

Wednesday, February 18, 2009

This should clear it up. Right

This should clear it up. Right

THE WHITE HOUSE

Washington

February 18, 2009

Support Under the Homeowner Affordability and Stability Plan: Three Cases

Family A: Access to Refinancing

􀂃 In 2006: Family A took a 30-year fixed rate mortgage of $207,000 on a house worth $260,000 at the

time. (The family put just over 20% down.) They received a Fannie Mae conforming loan with an

interest rate of 6.50%.

􀂃 Today: Family A has about $200,000 remaining on their mortgage but their home value has fallen 15

percent to $221,000.

o Their "loan-to-value" ratio is now 90%, making them ineligible for a Fannie Mae

refinancing.

􀂃 Under the Refinancing Plan: Family A can refinance to a rate of 5.16%. This would reduce their

annual payments by nearly $2,350.

Existing Mortgage Refinancing

Balance $199,584 $203,575

Remaining Years 27 30

Interest Rate 6.50% 5.16%

Monthly Payment $1,308 $1,113

Savings $196 per month, $2,347 per year

Family B: Access to Refinancing

􀂃 In 2006: Family B took a 30-year fixed rate mortgage of $350,000 on a house worth $475,000 at the

time. (The family put just over 26% down.) They received a Fannie Mae conforming loan with an

interest rate of 6.50%.

􀂃 Today: Family B has about $337,460 remaining on their mortgage but their home value has fallen to

$400,000.

o Their "loan-to-value" ratio is now 84%, making them ineligible for a Fannie Mae

refinancing.

􀂃 Under the Refinancing Plan: Family B can refinance to a rate of 5.16%. This would reduce their

annual payments by nearly $4,000.

Existing Mortgage Refinancing

Balance $337,460 $344,210

Remaining Years 27 30

Interest Rate 6.50% 5.16%

Monthly Payment $2,212 $1,882

Savings $331 per month, $3,968 per year

THE WHITE HOUSE

Washington

February 18, 2009

Family C: Eligible for Homeowner Stability Initiative

􀂃 In 2006: Family C took out a 30-year subprime mortgage of $220,000, on a house worth $230,000

at the time (they put less than 5% down). Their mortgage broker – Mom & Pop Mortgage – sold

their loan to Investment Bank. The interest rate on their mortgage is 7.5%.

􀂃 Today: Family C has $214,016 remaining on their mortgage but their home value has fallen -18%

to $189,000. Also, in November, one parent in Family C was moved from full-time to part-time

work, causing a significant negative shock to their income.

o Their loan is now 113% the value of their home, making them "underwater" and unable to

sell their house.

o Meanwhile, their monthly mortgage payment is $1,538 and their monthly income has fallen

to $3,650, meaning the ratio of their monthly mortgage debt to income is 42%.

􀂃 Under the Homeowner Stability Initiative: Family C can get a government sponsored

modification that – for five years – will reduce their mortgage payment by $406 a month. After

those five years, Family C's mortgage payment will adjust upward at a moderate, phased-in level.

Existing Mortgage Loan Modification

Balance $213,431 $213,431

Remaining Years 27 27

Interest Rate 7.50% 4.42%

Monthly Payment $1,538 $1,132

Savings: $406 per month, $4,870 per year

Homeowner Stability Initiative: How the Program Works for the Lender, Government and Borrower

􀂃 First, Investment Bank (working through a mortgage servicer) reduces the interest rate so that the

Family C's monthly debt-to-income ratio drops from 42% to 38%. This means that Investment

Bank must reduce the interest rate from 7.50% to 6.38%, bringing down Family C's monthly

payment from $1,538 to $1,387.

􀂃 Second, the government and Investment Bank share the cost of further reducing the interest rate

so that the Family C's monthly debt-to-income level is lowered to 31%. Any dollar the bank spends

is matched by the government. At this stage, Family C's interest rate is reduced from 6.41% to

4.43%. In total, Family C's monthly payment has fallen from $1,538 to $1,132.

􀂃 If Family C remains current on their payments, they will receive incentive payments up to $1,000 a

year, or $5,000 over five years, that would go towards reducing the principal they owe.

Additionally, the mortgage servicer can earn an up-front incentive fee of $1,000, plus up to $1,000

per year in "Pay for Success" fees for three years, so long as Family C remains current.

 

I wonder if the White House hired new phone service for all of the people that will be calling asking "where is my money"

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