Unfortunately, the program referred to as “Making Home Affordable” (MHA) will not benefit many homeowners in this market. Call me a cynic, but I believe that the scope of this program is so narrowly focused that very few homeowners will be able to qualify.
The reason is that area depreciation (like so many others) has been severe. This program will not allow you to refi more than 5% above the current value of your home. As an example – Say you had put 10% down on a home in 2005. If that home has now depreciated by 25%, you would be 15% “upside down”, or 10% above the qualification threshold.
Look at it another way:
$300,000 – Purchase price in 2005
$ 30,000 – Down Payment
$270,000 – Mortgage Balance
$225,000 – Current Value (25% less than original purchase price)
$236,250 – Maximum MHA refi loan amount (5% above current value)
As you can see, there is a difference (deficit) of $33,750 between the existing mortgage balance and the amount that could qualify for a MHA refi.
This program equates to typical government fuzzy math. It’s like putting lipstick on a pig – It sounds cute but it does not accomplish much 🙂