Understanding the Obama Mortgage Questionnaire

April 6, 2009

Those in Fannie Mae/Freddie Mac home loans or conventional mortgages who want to take advantage of the Obama mortgage refinancing option under the Home Affordable program are asked a few simple questions to determine eligibility.

If you've visited the official site for the Obama mortgage or a lender's site, you will be asked these four questions in the initial screening process.

1. Do you own a one- to-four unit home?

2. Do you have a mortgage guaranteed by Fannie Mae or Freddie Mac?

3. Are you current on your home loan payments?

4. Is the amount of money you owe on your loan about the same or less than the current value of your home?

These questions are simple for more experience borrowers, but if you are new to loans, conventional mortgages and refinancing some additional explanation may be necessary.

Question #1 is the easiest to explain. Under the terms of the Obama mortgage refinancing option, those who own single family homes may be eligible, but if you own property with more than one unit you may also be eligible-as long as you reside on the property yourself.

Question #2 is often confusing-just what are Fannie Mae and Freddie Mac? Fannie Mae and Freddie Mac are government supported enterprises. They are private agencies which are supported by the government. Their status allows a home buyer to get a home loan at a lower interest rate. Fannie Mae and Freddie Mac loans have a lower cost than other home loans. If you aren't sure whether your loan is a Fannie Mae or Freddie Mac loan, call your loan officer to find out.

Question #3 is simple enough-but there is confusion over what is considered "current". Under the terms of the Obama mortgage, being current on your Fannie/Freddie home loan or conventional loan doesn't just mean you've made all your payments in the last 12 months. It also means your payments were not more than 30 days late at any time in the last 12 months. That's an important distinction to make. If you were more than 30 days late on a mortgage payment or conventional loan in the last 12 months, you have two choices. You may be able to wait until 12 months have passed with on time payments-or you can consider the loan modification version of the Obama mortgage homeowner relief program. If you choose to wait, know that the Home Affordable homeowner bailout program is scheduled to end June 10, 2010.

Question #4 refers to the Obama mortgage requirement that you owe less than the current value of your home. Some borrowers get confused over this point. If your payments have gone up significantly as a result of a variable rate mortgage, you may be paying far more per month than you would with a fixed interest rate. The amount of money paid would-if that higher interest rate did not change over the lifetime of the loan--equal more than the home is worth. But Question #4 refers to the total amount of your remaining loan payments compared to the actual market value of the home. If the amounts are equal or the amount you owe is less than the market value, you can safely answer "yes" to question #4.