Affordable Housing Initiative Hits the Web

The Treasury Department and the Department of Housing and Urban Development have launched a Web site that provides basic information for troubled homeowners about the Obama administration's "Making Home Affordable" program.

The site, http://www.makinghomeaffordable.gov, usefully arranges in one place information on the two-pronged approach of the new initiative.

There's the refinancing part, designed to help homeowners who are paying their mortgages on time but are not able to refinance at the current low mortgage rates because of a decrease in the value of their homes.

Under the refinancing section, eligible first mortgage loans can't exceed 105 percent of the current market value of the home. For example, if your home is worth $200,000 but you owe $210,000 or less, you may qualify. There's no help to renegotiate a second home loan.

The second prong is aimed at homeowners who are struggling to make their monthly mortgage payments because their interest rates have increased or their incomes have been reduced. This part aims to modify terms to get homeowners to a point where their monthly first lien mortgage payment is not more than 31 percent of their gross, or pretax, monthly income. In my view, affordable would be to use a person's net, or take-home, monthly income, but that would just make too much sense.

On the Web site, you'll find a calculator where you can estimate what your modified mortgage payment would be using the new 31 percent guideline.

One of the good things about this site is the page containing frequently asked questions. Read them carefully because this is where you'll find details of the programs and all the caveats.

For example, as explained by the Treasury under the modification program, you have to show you can successfully make your payments for three months. If you stay current at the end of the trial period, the interest rate you receive will stay fixed for five years. The federal government is providing incentives for loan servicers to offer interest rates as low as 2 percent so a borrower's monthly payment hits that 31 percent mark.

The Treasury says if a 2 percent interest rate does not result in a payment that is affordable, your servicer could extend your loan to 40 years, defer repayment on a portion of the amount you owe, or forgive a portion of your mortgage debt. But the latter option is completely up to the discretion of the servicer. The program does not require principal forgiveness.

Under the modification part of the program, starting in the sixth year the interest rate may increase no more than one percentage point per year until it reaches the rate cap indicated in your modification agreement. This cap can never be higher than the market rate on the day your loan was modified.

Depending on which program fits your needs, you can take a quick, four- or five-question test to see if you qualify for help. If your answers show you're eligible, you're taken to a page with a checklist of the documents you will need when contacting your loan servicer.

On this same page, you get this message from the Treasury: "Please be patient. Lenders and servicers have started to implement the program and there may be a slight delay before they are prepared to process all applications."