To qualify the property must be owner occupied, homeowners must have a solid payment history, and the existing mortgage must be owned by Fannie Mae or Freddie Mac.  To find out if your confoming loan qualifies visit Fannie Mae at www.fanniemae.com/homeaffordable and Freddie Mac at www.freddiemac.com/avoidforeclosure.

Having a second mortgage or line of credit does not disqualify a homeowner and only the first loan counts toward the 105%.  However, all junior lien holders must agree to subordinate to the new first mortgage and borrowers can not take cash out of the refinance to pay other debts.  Only transaction costs associated with the refinance may be included in the refinance amount.

Finally, if a borrower is delinquent in paying their mortgage they are not eligible for the refinancce option and should contact their loan servicer to see if they qualify for a Home Affordable Modification. The Modification option of the Obama plan will be discussed in an upcoming post.