It's going to be huge deal for home owners and it's definitely the number one real estate topic in Washington at the moment: The Obama administration's ambitious new programs to either refinance or modify up to nine million mortgages nationwide, including many that are either "underwater" - worth less than the loan balance -- or in serious risk of going to foreclosure.

The Treasury and White House released the operational details last week on what they're now calling the "Home Affordable" initiatives.

Under the refinancing program, an estimated four to five million borrowers whose mortgages are held or guaranteed by Fannie Mae or Freddie Mac -- and who cannot qualify for a refi because their home values have dropped -- will be able to refinance into new 30-year loans with market rates currently in the low 5 percent range.

Starting immediately, Fannie and Freddie will flash the green light for such refis without even requiring new mortgage insurance, which normally would be mandatory for anyone with less than 20 percent equity.

Maximum loan to value ratios can go to 105 percent, and maximum mortgage amounts can go as high as nearly $730,000.

Home owners who want to qualify first will need to find out whether Fannie or Freddie holds their mortgages. Their mortgage servicers should be able to tell them quickly, but getting through to your servicer might prove challenging for the next week or two. They're already swamped with calls.

Fannie and Freddie both say they'll try to help out by creating online resources for borrowers to check whether either corporation owns the loan.

The second program, known as "Home Affordable Modification," is designed to restructure three to four million seriously delinquent mortgages, including those that would otherwise go to foreclosure this year.

To qualify, your loan must have been closed prior to January 1 of this year, and you have to be prepared to work with your servicer to make on-time payments at a reduced rate.

Under the plan, loan servicers who lower financially troubled borrowers' monthly payments to no more than 38 percent of their income will then get government matching funds to reduce payments even further -- to 31 percent of monthly household income.

To accomplish this, interest rates on some loans will be cut to as low as two percent, payment terms will be stretched to as long as 40 years, and in extreme cases, loan balances (what the borrower owes on the mortgage) will be cut as well.

Published: March 9, 2009

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.