Is a loan modification right for me?
A great way to avoid foreclosure is to arrange a loan modification with the lender. Depending on the lender they might be very open to this option. Of course they will try to do the loan modification in their favor, so having a knowledgable attorney that understands the process is very helpful. Loan modifications have been around a long time. Back in the 1930’s, during the depression, the government, particularly local governments, were active in trying to help home owners avoid foreclosure. They enacted several pieces of legislation that helped people stay in their homes.
Today, loan modifications have again become common and both homeowners and lenders are anxious to use this method to help move all of us back into a positive direction in the home mortgage market.
The HAMP Program
The government offered the Home Affordable Modification Program (HAMP) back on February 18, 2009 to help millions of struggling homeowners at risk of foreclosure by working with their lenders to lower monthly mortgage payments.
This program has these guidelines and stipulations…
- Loans must be originated on or before January 1, 2009
- Loans must be First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750. There are higher limits allowed for owner-occupied properties with 2-4 units.
- All borrowers must fully document income, including signed IRS 4506-T, proof of income (i.e. paystubs or tax returns), and must sign an affidavit of financial hardship
- Property owner occupancy status will be verified through borrower credit report and other documentation; no investor-owned, vacant, or condemned properties
- Incentives to lenders and servicers to modify at risk borrowers who have not yet missed payments when the servicer determines that the borrower is at imminent risk of default
- Modifications can start from now until December 31, 2016; loans can be modified only once under the program, previously it has been extended
In return for working with borrowers, lenders who service these modifications are given financial incentives and guarantees to encourage them to help home owners. They don’t do it out of the goodness of their hearts. But they must make a serious effort to find and help owners instead of initiating foreclosure proceedings.
The HARP Program
Just recently, the federal government came up with a new program, called the Home Affordable Refinance Program (HARP). It helps a broader range of homeowners and particularly those who have stayed in their jobs and kept up with payments. The loans must be owned or guaranteed by Freddie Mac or Fannie Mae. Other stipulations include:
- The mortgage must have been sold to Freddie Mac or Fannie Mae on or before May 31, 2009.
- The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May 2009.
- You must be current on your mortgage at the time of the refinance with a good payment history over the last twelve months
- The current loan-to-value (LTV) ratio must be greater than 80%
To determine whether your loan is owned by Freddie Mac or Fannie Mae you can go to this website and use the lookup table. http://www.makinghomeaffordable.gov/get-assistance/loan-look-up/Pages/default.aspx
Visit FannieMae.com or call (800)7Fannie. Visit FreddieMac.com, call (800)Freddie, Option 2 If you have additional questions about getting mortgage help, contact one of our housing advisors at (888) 995-HOPE (4673). These HUD-approved housing counselors will help you understand your options, design a plan to suit your individual situation, and prepare your application. Research shows that homeowners who work with housing counselors like these are more successful and have better long-term outcomes. There is no cost to you for this valuable, around-the-clock service. Help is available in more than 160 languages. If you’d like some help, Brown & Associates is always available to answer your questions and help you with your real estate law needs. Contact us here.