Housing rescue plan requires homeowners to put up proof

WASHINGTON -- The Obama administration on Wednesday outlined key details of a $75 bilion housing rescue plan expected to help as many as 9 million homeowners rework mortgages into more affordable monthly payments.

Among the details, borrowers who want to qualify for the loan modification plan will have to provide proof of financial need and payment ability, including an affadavit of financial hardship, their most recent tax return and two pay stubs.

The program will apply to loans made on or before Jan. 1, 2009 and modifications will be allowed only once. Those with first mortgages of more than $729,750 do not qualify.

"Today's annoucement means you should call your lender to find out if you qualify," says Lawrence Yun, chief economist with the National Association of Realtors (NAR). "This should get the ball rolling."

The outline of the rescue plan was announced Feb. 18. Among the details added Wednesday:

• Loan refinancing. Up to 5 million homeowners with a solid payment history on mortgages held or owned by Freddie Mac and Fannie Mae will be eligible to refinance into more affordable terms.

The rules announced Wednesday say homeowners may be able to refinance even if they have less than 20% equity in their homes. An appraisal may be necessary.

The program will end in 2010.

Requests for loans to buy homes and refinance mortgages dropped for a second straight week last week as potential borrowers held back in hope of even lower mortgage rates and help from the Obama rescue program.

The Mortgage Bankers Association's total applications index slid by nearly 13% to about half the level it had reached earlier this year when loan rates fell to 4.89%. The average 30-year mortgage rate last week was 5.14%, the trade group said.

• Loan modifications. Lenders and other loan servicers can begin making modifications that could help up to four million at-risk homeowners stay in their homes.

To be eligible, homeowners with a first loan can have an unpaid principal balance up to $729,750. Higher limits will be allowed for owner-occupied properties with two to four units.