The Housing and Affordability Plan

Although the President’s “Housing and Affordability Plan” was announced on February 17th, it wasn’t until yesterday that we got the details of what it actually means to homeowners.  We are finally seeing some changes in guidelines, starting today with a major announcement by Fannie Mae.  It was announced that over the next two months, significant changes are being implemented that will loosen credit guidelines and start lending to responsible people again.  The pendulum that swung too wide and then back again, is now a little closer to the middle, where we knew it would end up but we just weren’t sure how soon. 

The tightening has been taking place since last year, with the focus being on equity and credit scores, completely ignoring those who may have less than 20% equity or a credit score below 680.  But new guidelines are focusing on who has been responsible enough to keep up with payments, rather than just sticking to a “set” formula.  The focus has been on those who couldn’t keep up, so it’s good to finally see relief for those of us who have making payments on time and doing whatever we have to to keep our heads above water. 

So far, only Fannie Mae has released their new guidelines so your loan must be a Fannie Mae serviced loan (contact your current lender or visit http://www.fanniemae.com/homeaffordable to find out if your loan is a Fannie loan) Some of the most important changes include:

• No PMI required on a refinance if you previously didn’t have PMI.  In other words, if your home’s value has dropped (most likely the case) and you go to refi and you now have less than 20% equity, then you won’t be required to have PMI.
• Ability to refinance a loan with an existing second mortgage where the total LTV (loan to value) is up to 105% of the value.  (Previously this was 95%)
• Relaxed credit score requirements for scores below 680.

As you can see, they are really working hard to help everyone, not just those on the brink of foreclosure.  And I believe many more changes are coming for responsible homeowners, including lower rates.  Stay tuned…

1. Bi-Weekly Mortgages, Are They Worth It?
2. Higher Rate, Lower Fees or Lower Rate, Higher Fees?
3. How Recent Market Changes Can Affect You
4. Rates Are Based on Your Credit Score and Equity
5. Should I Escrow Taxes and Insurance Or Pay Them On My Own?