Big Week Coming Up for Obama Housing Plan

Next week will be a big week for lenders and borrowers who are anticipating the details of President Obama’s housing plan. It won’t roll out until March 4, but we thought we’d review what we do know so far about qualifying for a refinance loan under Obama’s plan. To qualify, you must:

• Owe between 80-105% of your mortgage. An analysis of Zillow Q4 Real Estate Market Reports shows that 26% of mortgage holders, or 14.8 million homeowners, currently qualify to refinance under these specifications. One quarter (24.6%) of homeowners with mortgages (14 million) do not qualify because they are underwater and owe more than 105% of their home’s value. This is especially true in hard-hit areas of California or Florida, where home values have fallen 40% or more since the peak. Now the question remains: “How Will the ‘Obama Refinance’ 105% Be Calculated?
• Have your loan backed by Fannie Mae or Freddie Mac. Approximately 60% of single-family loans are backed by Fannie or Freddie, but a homeowner may not know this about their own loan. If you don’t know, call your lender and ask.
• Have a conforming loan. That means a loan under $417,000 in many areas — or up to $625,500 in high-cost areas like San Francisco, Boston or Washington, DC. Even still, the Zillow Home Value Index (median home value) for the city of San Francisco is $724,244, which says that lots of people have loans higher than the conforming limit. (Note: the conforming loan limit for certain high-cost areas of the U.S. for 2009 mortgage originations is now $729,500.)

We also consulted with Phoenix loan officer Justin McHood who is a key contributor on Mortgages Unzipped to help provide some guidance for anyone wondering what to do until details are revealed. His advice:

1. Get all of your paperwork together. Gather in a folder a copy of your driver’s license, copy of your Social Security card, two of your most recent pay stubs, your most recent mortgage statement, the past two years of your W2s, and past two months of bank statements from all accounts.
2. Fill out a loan request. Go to Zillow Mortgage Marketplace and fill out a free, anonymous loan request. In the “notes” field of the request, indicate that you are interested in doing an “Obama refinance” in the next month.
3. Be patient. Until March 4, lenders won’t know the exact guidelines for an “Obama refinance” — only that one is coming. Once details are announced, expect lenders to take a week or two to implement the guidelines. For example, will an appraisal be required? Will there be different interest rates charged by the lenders for the “Obama refinance?”
4. Stay informed. Keep updated on the news so that once details of the plan are released on March 4, you will know whether or not you can qualify.

Justin says critical details as to whether you qualify or not depends on how you determine what your house is worth. Also, what is the method for calculating your exact payment to be 31% of your debt-to-income ratio? What counts and what doesn’t count in this ratio?

It’s obviously pretty complex, but get your paperwork ready, start to shop for lenders (read their reviews and ratings on Zillow Mortgage Marketplace), stay on top of the news and come back here on March 4 to learn the details.

Or, be notified by e-mail. Just go to Account Settings (you may need to sign in) and select the checkbox next to “Buyers, sellers, homeowners” (example above). You’ll be one of the first to know about the Obama refinance details.

See what others are saying

• Go to Zillow Advice’s Economic Watch and the mortgage advice sections and join the conversation.
• See what others are saying about the Obama housing plan in Zillow Advice.