How Does the Homeowner Affordability and Stability Plan Work?
The new, refinanced loan can’t be more than 105 percent of the value of the existing home. For example, if your property is worth $200,000, you may qualify as long as you owe $210,000 or less. Homeowners with second mortgages are also eligible, but with certain restrictions. The 105-percent rule remains in effect. The lender of the second mortgage, however, needs to agree to keep the loan in the “second position” when it comes to monthly payments. And homeowners still need to prove they can meet the payment terms of the new first mortgage. An Example: The Obama administration gave this example of how the plan would impact a homeowner paying back a 30-year fixed rate mortgage of $207,000, with an interest rate of 6.5 percent, on a house worth $260,000 at the time of the purchase. Today, that homeowner still owes $200,000 on the original mortgage, but the value of that home has fallen 15 percent, to $221,000. The drop in the home’s value makes the homeowner ineligible to refinance under
