Making Home Affordable program may enable millions to refinance mortgages

Although the loans are supposed to involve minimal new checks for qualified borrowers, it's always good to collect paperwork beforehand. This would include information about your current mortgage, such as your monthly statement; recent pay stubs, income tax forms or other documentation of your household income; details about any second mortgage or home equity line of credit on the house; and account balances and minimum monthly payments on your credit cards, student loans, car loans and other debts.

Loan types

Most of the refinanced mortgages will have fixed rates with terms of 15 years or 30 years, although some may extend to 40 years. Some borrowers with adjustable-rate mortgages may qualify for new adjustable loans with initial fixed rate periods of at least five years. There are no prepayment penalties or balloon payments.

Mortgage insurance

It's not required on the new loans, but if you had it on your old loan, you'll have to keep it.

Fees

The new loans should be low cost. Lenders should not have to do much checking on candidates because they are by definition solid borrowers with credit histories already on file. As usual, expect some trade-offs, with lower fees available if a borrower accepts a higher interest rate, said Brad Blackwell, Wells Fargo's executive vice president of national retail mortgage sales.

Freddie Mac has capped the amount of fees and points that borrowers can wrap into the new loan at $2,500, spokesman German said.

At Fannie Mae, there is no cap on the amount of fees and points that can be financed as part of the loan.

Fees that are included in the amount financed count toward the 105% loan limit.

Appraisals

Fannie Mae and Freddie Mac have approved computerized appraisal systems that can be used to speed the refinance process, although lenders can elect to have the properties appraised the old-fashioned way, with humans paying a visit to the home.

Second mortgages

Borrowers with second mortgages or home equity lines of credit can participate, but they can't consolidate the two loans into a single new mortgage. That can mean tricky negotiations because the second-mortgage lender must agree to stay in second position for repayment.

Second homes

There are no limits on how many mortgages a borrower can refinance, assuming that the loans meet the program criteria.

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scott.reckard@latimes.com