Fannie Mae Refi Solution Helps Underwater Homeowners

Are you stuck with high mortgage interest, but think you can't refinance because you owe more than the house is worth? You may still be able to qualify for a Fannie Mae Refi Plus loan.

You can get a refi for up to 125 percent of your home's value. That means if the current market value is $200,000, you can get a mortgage up to $250,000. So even if your house is underwater, if you're stuck with a loan above 6 percent, you should still talk with your lender about a Fannie Mae Refi Plus loan. You may also want to use this program to lock in a low fixed rate, if you still have an adjustable rate mortgage.

The loan must currently be owned by Fannie Mae. You can find out if your loan is eligible by using the Fannie Mae lookup tool. If you find out your loan is owned by Fannie Mae, your next step is to call your loan servicer. You can find out if your servicer is in the Fannie Mae network and a contact number for him using Fannie Mae's search tool.

The refinance process for Fannie Mae has been streamlined and you may not even need to get an appraisal or credit check, as long as you have been paying your mortgage on time.
The lender will review your financial information and see if you meet the current Refi Plus underwriting guidelines. If you find out you're not eligible for this streamlined process, you may still be able to refinance using the Home Affordable Refinance Program.

If you live in one of the hardest hit states and you need even more help because your house is so far underwater. Don't give up. There are special programs in the hardest hit states: Arizona, California, Florida, Michigan and Nevada:

  • Arizona will provide principal reduction, interest rate reduction, and/or term extension programs to help you find a permanent modification program. The state will even offer to assist with elimination of a second lien to help a modification go forward. There's also special assistance for the unemployed.
  • California will provide assistance to reduce principal with earned principal forgiveness.There's also help for unemployed families. If you decide you want to give up your home California has programs to assist with short sales and deeds-in-lieu of foreclosure with incentives to have you transition to a stable housing situation.
  • Florida has special programs for unemployed and under-employed while they seek re-employment. The state will also offer principal reduction or second lien extinguishment if necessary to achieve a mortgage modification.
  • Michigan will subsidize an unemployed borrower's mortgage payments while they search for employment. There's also assistance for people experiencing a financial hardship. Homeowners with negative equity may also be eligible for earned principal forgiveness.
  • Nevada offers a mortgage modification program using a combination of forgiveness and forbearance with a goal of reducing principal to less than 115 percent of LTV (loan-to-value) and lowering payments to 31 percent of DTI (debt-to-income). The state will also offer assistance to reduce/eliminate second liens with earned forgiveness over a three-year term. Plus you can get help with appraisal and transaction fees, moving fees, a legal allowance for up to three months, and a combination of incentives for borrowers and servicers to facilitate short sales.

First make a call to your lender. But, if they say they can't help you or are dragging their feet, then call a HUD housing counselor. In fact, even if your lender is willing to work with you it can't hurt to call for the aid of a housing counselor anyway. They can help you fill out the paperwork and assist you through the application process.

Lita Epstein has written more than 25 books, including "The 250 Questions You Should Ask to Avoid Foreclosure."

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