Is there really an Obama bad credit mortgage plan?

By Gina Pogol
Mortgage Credit Problems Columnist

Dear Gina, I saw a story on the web saying bad credit mortgage refinance plans are available as part of the Obama stimulus. Specifically, the website says, "Mortgage Refinance with Bad Credit options now exist for millions of homeowners thanks to President Obama's housing stimulus program." How do I get into this program? - Jess, Eugene, Ore.

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Dear Jess,

I'm sorry, but there is no such thing as an Obama bad credit refinance program. You are referring to an advertisement designed to look like a news story. There are other similarly misleading advertising campaigns, including an "Obama wants moms to go back to school" campaign and an "Obama discount car insurance available" campaign.

The refinance advertisement you saw was put out by a company that charges for loan modification services. It is it not a mortgage lender at all. Stay away. If you have a bad credit mortgage that you want to refinance, consider more legitimate options. I'll go through them here.

  1. FHA refinance. If you have paid all of your bills on time for the last 12 months, can prove that you have sufficient and stable income and have at least 10 percent equity (for credit scores of 500 to 579) or 3.5 percent equity (for credit scores of 580 or higher), you might be able to get approved for an FHA refinance. Even if you are turned down now, your loan agent should be able to list what you need to do to get approved for a refinance in the future.
  2. Bad credit mortgage refinance. Mortgage rates have improved a lot in the last couple of years. Even if you have bad credit, it can't hurt to see if you qualify for a bad credit mortgage refinance at a better rate than that of your current mortgage. Bad credit lenders are harder to find than they used to be, but there may be one willing to refinance your mortgage today.
  3. Compare mortgage rates. Complete an online form such as the ones you see on MortgageCreditProblems.com. You won't have to provide your Social Security number, and you can get quotes on bad credit mortgage refinance loans and FHA refinances from several lenders.
  4. Get a legitimate bad credit mortgage modification. If the payment on your bad credit mortgage is causing you hardship, you might qualify for a mortgage modification. That's what the site you saw is referring to in its "news story." But don't get mixed up with some company advertising phony "Obama refinances" and pay them a lot of money to do what you can do yourself for free. Just go to the federal government's Making Home Affordable website to see if you are eligible for a modification. You can also call the government's hotline, 888-995-HOPE, to get in touch with a housing counselor approved by the U.S. Department of Housing and Urban Development. Best of all, it's free.

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