Hope for Distressed Homeowners

Recently, the guidelines for President Obama’s Making Home Affordable program were finally released. The program is designed to drastically reduce the number of homes falling into foreclosure by allowing up to 9 million homeowners to refinance or modify their existing home loans.

There are some very specific criteria you must meet to qualify. Here are the qualification criteria:

  • You must owe between 80% to 105% of your mortgage. What does that mean? The number reflects your mortgage to home value ratio. In other words, you can only owe between 80% and 105% of your home’s current market value. There is some market data that suggests approximately 25% of mortgage holders nation wide will qualify. Because of the large numbers of foreclosed homes in the Las Vegas valley, several areas have seen home values fall by up to 50% or more from prices in 2006. So you'll need to get a current, accurate appraisal of your home's value.
  • Your loan must be backed by Fannie Mae or Freddie Mac. If you’re not sure, you can call 1-800-7FANNIE and 1-800-FREDDIE to check. You can also check online.
  • Be within the conforming loan limits. The conforming amount will vary by city. For example, high cost areas like Boston, New York or Washington DC will have higher conforming loan limits than say, Des Moines.
  • Visit financialstability.gov and complete the Q&A to see if you qualify under the guidelines. It will determine if you qualify for loan modification or refinancing.

Other Options

Even if you don’t qualify for government program, that doesn’t mean you’re out of options. With so many foreclosures hitting the market, banks are more inclined to negotiate with homeowners rather then foreclose. You can contact your bank directly to renegotiate your home loan. There are several options available to you, depending on your situation. In the case of a temporary setback, you might negotiate an option called forbearance, where your bank agrees to suspend monthly mortgage payments for a set time. After which you resume making your normal monthly payments and start paying back the payments you missed.

You may also try to renegotiate the loan, to reduce the monthly payments to a more affordable level, as well as changing the terms of the loan from something like an adjustable rate mortgage to a standard fixed rate mortgage.

If there is no possible way for you to keep your home, you may also want to consider a short sale and sell the property. In order to do that, you’ll need an agreement from your mortgage holder(s). They’ll need to approve the short sale price and any offers on the property must be approved by them.

All of these options and more are available and can be done by you. Be aware that there are predators out there that will try to charge you exorbitant fees to “help you” avoid foreclosure. There are plenty of state, federal and non-profit organizations out there that will help you free of charge. Don’t throw good money after bad! Talk to your lender first and see what your options are.

**Update

On April 28th, the Obama Administration came through on its promise to help homeowners who are facing foreclosure and couldn’t modify their existing loan.  The initial program has been expanded to include second mortgages. Quite a few homeowners were unable to secure new financing due to a second mortgage on the property. According to Obama administration officials, it's estimated that as many as 1.5 million homeowners could be helped by addressing second mortgages.

Comments

Sell the house to a family member or friend?

The first comment by Anon peaked my curiosity.... IS it possible to sell your home to a family member or friend in order to lower your monthly payments AND claim the tax credit?

WHY DO THE RICH GET RICHER

SPOKE WITH A WOMAN AND SHE SAID... MY LIVE IN BOYFRIEND OF FIVE YEARS IS SELLING ME HIS HOUSE AND THEN I AM CLAIMING THE FIRST TIME HOME BUYER CREDIT ON MY TAXES AND I'M GETTING $8000 BACK, NOT TO MENTION MY NEW $5,000 DIAMOND ENGAGEMENT RING.

THANKS PRESIDENT OBAMA. MY HOUSE WHICH IS JUNK AND ONLY KIND SOME POOR SLOB WOULD BOTHER TO HAVE TRIED (YES TRIED, I AM LOSING IT TO THE BANK) TO OWN (ONLY VALUED AT $115,000 - THAT'S TRAILER TRASH) IS BEING LOST TO FORECLOSURE.

I AM GLAD YOU DID THE TAX CREDIT AND HELPED THE RICH STIMULATE OUR ECONOMY. YOU ARE SMARTER THAN MOST CAN REALIZE BECUASE IF THE RICH GET RICHER THEY WILL SPEND BIGGER.

Homes

I wonder how many home owners this program has helped. We're located in Bellingham, Washington which is between Seattle and Vancouver, BC. Seattle has had its fair share of foreclosures and stalled projects. Expanding the program to include second mortgages was a step in the right direction, but I think it still isn't enough to really make a big difference.

Loan Modification

"Talk to your lender first" seems to be the prevailing advice out there given to homeowners facing financial hardship. However, most of my clients are telling me that "my lender wanted me to call them but they didn't want to listen". If your loan or situation does not fit a narrowly defined and often vague set of criteria set forth by your lender or the federal government then chances are you will have a very difficult time getting a loan modification. The only real hope out there for most Americans who do not fit this narrow criteria is a legitimate loan modification company.

loan modification or refinance

I am not upside down in my home.I still have equity,But I have a hard money loan and .Need help getting out of it and a 3 1/2 year ballon pament due in 2010.Can you help me?

How much of a balloon payment

How much of a balloon payment and are you willing to sell and lease back the property with five year set amounts to re-purchase if the balloon is paid and save your property and your roof over your head ?

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