All good things must (and usually do) end, and it’s no secret that the First Time Homebuyer’s Credit expiration date is looming. The National Association of Realtors, along with countless real estate agents and lending institutions are waving the last lap flag in the race to buying a first home. The American Recovery and Reinvestment Act of 2009 allows for up to $8000 tax credit to a first time home buyer that closes a loan on the purchase of a primary residence on or before November 30, 2009. 

Many prospective homebuyers question whether there is still time to find a home and close on in before the deadline. While there may be some exceptions to the rule, with less than two months left before the opportunity disappears, it probably is too late. Generally, once you find a home, it takes anywhere from 30 days or more to get through the home buying and mortgage financing process in order to cross the finish line.

This means that unless the government decides to extend and expand the first time homebuyer program, if you’re not already close to closing on the purchase, then you probably don’t have enough time remaining to take advantage of the incentive.

The deadline for the First Time Homebuyers $8,000 tax credit is looming, which has many people scrambling to buy a home quickly so they can cash in on their free money too. Realtors, mortgage lenders, the federal government and even individuals believe this incentive has helped to stimulate the housing market.  

Some Realtors even believe it has caused a trickle-up effect to take place. With up to $8,000 of free money from the federal government, home buyers that once could not afford to buy a home are now in a position to make the move. Many of these individuals and families are buying some of the lower priced properties (under $200,000).

In turn, this is pushing up the existing homeowners of the $200,000 and under properties into higher priced homes of more than $200,000. The intention of the $8,000 credit was to stimulate the housing market to bring it back on track and the results so far seem to be positive. Not only are Realtors selling homes to first time homeowners, but they are also attracting the sellers of these properties to upgrade into larger and more expensive homes. Instead of the trickle-down effect, many see what is happening as the trickle-up effect.

After hearing complaints from struggling homeowners who have nowhere else to turn, a CNN investigation has revealed that the Making Home Affordable program isn’t working the way it’s supposed to be working. Based on government estimates, only 231,000 homeowners are taking advantage of a program that almost 4 million homeowners are eligible to use to reduce their mortgage payments.  

What the program is supposed to do.

In theory, the Making Home Affordable program is supposed to reduce homeowners’ monthly mortgages to more affordable payments. When the government gave a lot of money to banks to back existing loans, it was with the caveat that banks try to help people who fit within the guidelines for the program. People within certain income standards and with mortgages that fit into a predefined set of parameters are supposed to qualify for the program. Based on program guidelines, nearly 4 million homeowners qualify. Only a fraction of them have successfully navigated the program.

Where it’s breaking down.

Homeowners with a broad variety of banks and lenders are reporting difficulties navigating the program. Some lenders are misinforming homeowners as to eligibility requirements. Other banks are simply not returning phone calls or not responding to paperwork. Still other banks are actually foreclosing homes out from under qualifying homeowners who are attempting to utilize this program. So where’s the breakdown?

In truth, lenders have a variety of excuses for the difficulties. Many lenders complained that it took too long to get the requirements from the government, or that mortgage staff were uneducated about how to handle the program. Others have had trouble with the paperwork or providing accurate numbers.

What to do if you’re a homeowner.

First, you need to contact your lender about eligibility for the program. If you’re having trouble with the lender or aren’t sure what your options are, contact a government-approved housing counselor. For additional questions, call the administration helpline: 1-888-995-HOPE.

While the Obama Administration is devoted to helping homeowners with mortgage relief, which is backed up by the $75 billion it’s earmarked for programs to stop foreclosures, not every mortgage company or loan modification program has the same goal. It seems that some mortgage servicing companies are offering mortgage loan modification programs, but not ones that truly benefit the borrower. For example, one loan servicer was given $195 million in taxpayer incentives to encourage loan modification, but what it’s been offering its customers hasn’t been as sweet of a deal.  

For example, a mortgage borrower that had her mortgage payment more than double when her adjustable rate mortgage adjusted was given a modification, which did reduce her payment from $4,000 per month to $2,800 per month. The loan modification program granted was still an adjustable rate mortgage though rather than a fixed rate. If the mortgage loan modification had been granted under the terms of the Obama Administration’s Home Affordable Modification program, this same homeowner would be paying $1,600 a month on a 30-year fixed rate mortgage. Somehow, this doesn’t seem like it’s benefiting the borrower but is rather setup to benefit the lender.

Using this same company as an example, while they have 14,000 customer loans that are eligible for mortgage loan modification, it has only modified 597 loans to date under the Home Affordable Modification program it received $197 million in incentives to uphold. Instead, it’s dishing out its own loan modification program to customers at a rate of $17 billion in subprime loans. This is more than double the rate of any other mortgage loan servicer.

Searching for available refinance options for your mortgage loan? One program recently announced by Fannie Mae to assist homeowners is the DU Refi Plus option. DU Refi Plus, or Desktop Underwriter Plus, is designed specifically for individuals seeking to refinance their current mortgages on property owned throughout America with little to no equity. When a property is successfully refinanced, the monthly mortgage payment is reduced, offering financial relief.

Here are some of the DU Refi Plus program highlights:

• This option applies to all property types, including single family dwellings, condominiums, co-ops and manufactured homes. This option opens up doors for a variety of property owners to consider refinancing their loans.

• The maximum loan to value eligible for this refinancing option is 105%, helpful to homeowners who have experienced a decrease in their property value over the past few years. Loan to value refers to the amount currently owed in comparison to the appraisal value for the property.

• If there is a second mortgage on the property being refinanced under this program, it must be subordinated to the primary loan. Subordination refers to the second mortgage being placed in second priority to the primary mortgage in the event of a debt collection.

• Individuals have some credit score flexibility when using this refinancing option. There are some additional credit score options depending upon the current loan to value ratio of the property being refinanced. It is important to speak with your loan professional about your property for details.

• Individuals seeking this option must provide a recent pay stub and verification of employment for review. This is a reduction in the standard 2 paycheck requirement for traditional refinancing. If the applicant is self employed, prior year tax returns must be submitted for review.

• An appraisal on the property may be waived for newer properties. Or, only an exterior inspection may be required for a refinance under this program.

The overall purpose of this program is to enable homeowners to retain their properties through the lowering of the monthly financial obligation.