Details of President Obama’s plan to help struggling homeowners was announced today. This plan was announced a few weeks ago as the Making Home Affordable initiative. From the details which were announced today this plan helps two types of homeowners  and applies only to primary homes. This means you can not expect any help on your second (vacation) home or your investment property. To qualify you need to be either delinquent on your mortgage or be upside down on your home (owe more than your home is worth). The program applies to loans made on or before Jan. 1, 2009.

Here is how you can qualify if you are delinquent(or 60 days past due) on your mortgage:

• You must have lost your job, suffered a pay cut or face higher mortgage payments.
• You must meet the strict financial hardship guidelines of Fannie Mae or Freddie Mac
• These guidelines mandate you fully document your income with pay stubs, tax returns and sign an affidavit attesting to “financial hardship
• You need to go for counseling if your total household debt — including auto loans, credit cards and alimony — totals more than 55% of your income.
• Your homes unpaid principal balance can not exceed $729,750
• Have a Fannie or Freddie Mac loan (call your loan servicer to find out)

For those who are upside down on their mortgage the government will help refinance the loan in an effort to lower payment and make the home more affordable. Uncle Sam is willing to lend as much as 105% of your home’s market value. Now, I’m not sure how many people can benefit from this because many people are way above that level these days. Especially in the Greater Phoenix Metro area. The best way to start the process is by calling your mortgage loan servicer. They are the ones that will decide whether you qualify or not because the government has given them a financial incentive to help you.

Here are some additional things to consider (from the NYTimes):

A mortgage lender or mortgage-servicing company would first receive cash incentives to modify a borrowers’ loan so that the monthly housing payment declines to no more than 38 percent of the family’s gross monthly income. At that point, the government would match, dollar for dollar, the lender’s cost in reducing the payments as low as 31 percent of monthly income.

The reduced payments could come in the form of a lower interest rate, longer mortgage term or a reduction in the principal outstanding loan amount. The lender would have to make a calculation on whether its cost from reducing the monthly payments, after accounting for the government’s cost-sharing, would be less than the costs it would incur from foreclosing on the house.

The guidelines indicate that a lender would have to make the loan concessions if the subsidized cost of doing so would be lower than the cost of foreclosure. The decision would become voluntary if the estimated costs of the concessions appeared to be higher than the cost of foreclosure. If the lender decided not to offer the modification, such as in the case of a borrower who had become unemployed and whose income had largely disappeared, it would be required to examine alternatives to foreclosure before seizing the house.

The program will run until Dec. 31, 2012.