Article 43


Saturday, March 27, 2010

Help For Unemployed Homeowners


Housing Program Enhancements Offer Additional Options for Struggling Homeowners

March 26, 2010

Refinements to Existing Administration Programs Designed to Help Unemployed, Underwater Borrowers While Helping Administration Meet its Goals

Today, as part of its ONGOING COMMITMENT to continuously IMPROVE HOUSING RELIEF EFFORTS, the Administration announced adjustments to the Home Affordable Modification Program (HAMP) and to the Federal Housing Administration (FHA) programs.  These program adjustments will better assist responsible homeowners who have been affected by the economic crisis through no fault of their own.  The program modifications will expand flexibility for mortgage servicers and originators to assist more unemployed homeowners and to help more people who owe more on their mortgage than their home is worth because their local markets saw large declines in home values.  These changes will help the Administration meet its goal of stabilizing housing markets by offering a second chance to up to 3 to 4 million struggling homeowners through the end of 2012. Costs will be shared between the private sector and the Federal Government; the Federal cost of these changes will be funded through the $50 billion allocation for housing programs under the Troubled Asset Relief Program (TARP). 



Answers to Questions About New Mortgage Modification Program

By Ron Lieber and Jennifer Saranow Schultz
NY Times
March 26, 2010

The federal government announced new initiatives on Friday to help people who are having trouble paying their mortgages. Here are some questions and answers about the efforts.

Q.I am currently unemployed. What sort of mortgage payment reduction can I qualify for?

A.The company servicing your mortgage will be required to offer at least three, and up to six, months of reduced payments. During that time, you wont have to pay more than 31 percent of your monthly income toward the mortgage.

You have to live in the home to qualify, and the mortgage balance has to be less than $729,750, with a monthly payment that represents more than 31 percent of the gross monthly income of all borrowers who signed your mortgage, before you subtract anything for taxes or deductions. If one person in the household works and one is unemployed, you will not be eligible if the loan payment is under 31 percent of your current total household income.

Also, you need to prove that you are receiving unemployment benefits and ask for help within 90 days of any late payments.

The lowered payments would revert to the regular amounts once you got a job, if you became employed before the three- to six-month period ended.

Q.I’m underwater, since my mortgage is for more than my home is worth. What sort of help might I get from my mortgage company?

A.The company that controls your mortgage might reduce your principal, something that wasnt happening much before. The government is offering additional incentives for companies to do so.

Your property will need to be worth at least 15 percent less than the value of your first mortgage for you to qualify. If your mortgage has already been modified to lower your interest and monthly payments, you may still be eligible.

To qualify, you need to live in your home, have a mortgage under $729,750 and have a mortgage payment more than 31 percent of your gross monthly income.

Any principal forgiveness will take place in three equal amounts over the course of three years but only if you make your mortgage payments on time.

But banks are not required to participate.

Q.What about the new refinancing option with another lender for people who are underwater?

A.If you’re current on your payments with your existing mortgage provider, you may be able to refinance into a loan through the federal governments Federal Housing Administration program and have some of your principal forgiven. Here, too, you will need to be occupying your home to qualify; you can’t be an investor or landlord. You will have to documentyour income to apply.

Your current mortgage holder is not required to writedown any principal, but if it does decide to participate, it will have to agree to writedown at least 10 percent of the value of your first mortgage. And your current loan cannot itself be an F.H.A. mortgage.

Also, your payment under any new F.H.A. loan must be less than 31 percent of your gross monthly income, and your total household debt cant be more than about 50 percent of your income unless you have an excellent credit history.

Q.Who decides how much my home is worth and how?

A.There will be a reappraisal, which raises an odd scenario. Normally, when selling your home, you want the appraisal to be at a high value. Here, however, the lower the value of your home the more likely you are to be underwater enough to qualify for help.

Q.What if there is a second mortgage on my home?

A.There are now additional incentives in place to writedown amounts on second mortgages to help people become eligible for the F.H.A. refinancings. You may be eligible for help with a second mortgage even if you’ve already qualified for help with a first mortgage.

Q.Is there someplace I can go to get more details?

A.More information is available on the Treasury Departments Web site.

Q.How will a loan modification affect my credit score?

A.A loan modification may not affect your credit score - at least in the near future.

If your mortgage holder writes down some of your principal, theres a chance that wonҒt be a black mark on your credit report, but the exact impact is still unclear.

As of November, the credit reports of borrowers who had been participating in earlier mortgage modification program werent necessarily affected just by virtue of their participation. ThatҒs because the Treasury Department and the Consumer Data Industry Association, which represents credit reporting agencies, created a new code for loans modified under a federal government plan. They recommended that lenders use the code but did not require it. In the near term, FICO is ignoring that code in its credit scoring formula.

Its possible, however, that banks will treat some or all of the new principal forgiveness programs in a different way that could harm participants’ credit reports. A spokesman for the Consumer Data Industry Association said he was still working out what code or codes ought to apply. The federal agencies involved do not tell lenders how to report participation in the programs.

Meanwhile, if you participate in the temporary payment reduction program for unemployed people, you will probably see some damage to your credit report.

Q.When should I call my mortgage servicer?

A.For unemployed borrowers, this should all start in the next couple of months. Some servicers may already have a program in place. The other programs may not begin until the fall.

Your lender is supposed to contact people who are eligible for help, but its probably best to call in periodically yourself for updates if you think you may be eligible.

Q.Are lenders and servicers really going to be prepared to handle the volume of inquiries?

A.Many people attempting to modify their mortgages so far have been frustrated by long hold times, conflicting information and lost paperwork. These new programs wonҒt make it any easier for the companies involved. Make sure to writedown the names of everyone you speak to about your mortgage and save copies of all paperwork.

Q.I dont need any help. Am I paying for all of this through my taxes?

A.The money is coming out of existing TARP funds, so there is no new money going toward these initiatives. So far, at least.



Obama home-foreclosure relief: Do I qualify for a mortgage refinance?
Do you qualify for help under President Obama’s latest foreclosure prevention effort, announced Friday?

By Mark Trumbull
March 30, 2010

Here’s a quick take on who may be eligible under the new home-loan programs, which include aid to borrowers who become unemployed and incentives for lenders to reduce loan balances for underwater borrowers. The information comes from Obama administration statements and a Friday analysis of those plans by economists at Goldman Sachs in New York.

Three months of mortgage relief for the unemployed

For three months, jobless mortgage holders get temporary forbearance on their mortgage loan. They’ll still have to pay 31 percent of their monthly income, but not the full amount they usually have to pay each month on the loan. Loan servicers participating in the Making Home Affordable Program—which includes many big lenders—are required to offer assistance to all jobless borrowers who meet eligibility criteria.

To be eligible, you must show that you are drawing unemployment insurance benefits, that you live in the home, and that the loan was originated before Jan. 1, 2009. The loan balance must be below $729,750. You can’t be more than 90 days delinquent in your payments.

FHA refinance loan

Participation in this Federal Housing Administration program is voluntary, with the government providing incentives to encourage lenders to offer principal (loan balance) relief to borrowers at high risk of foreclosure. The target group is borrowers deeply “underwater,” with loan balances far above the current value of their home. The idea is to get a win-win outcome, where borrowers stay in their homes and lenders don’t lose as much as they otherwise might by foreclosing.

Lenders must agree to reduce the principal balance by at least 10 percent on a first-lien mortgage. After refinancing, the first mortgage can’t be larger than 97.75 of the home’s value (the current FHA limit) but the total loan-to-value ratio (with a second lien) may be as high as 115 percent. In many cases, this will mean substantial write-downs (losses) for both first- and second-lien lenders.

To qualify, borrowers must be current on their existing mortgage payment, occupying their home, and qualify under standard FHA underwriting guidelines including a FICO credit score of at least 500. The new loans can’t result in a monthly payment higher than 31 percent of borrower income. Many borrowers won’t qualify, but many also will.

Other mortgage relief

When evaluating what to do about at-risk loans, mortgage servicers in the Home Affordable Modification Program (HAMP) will be “required to consider” principal writedowns if the loan-to-value (LTV) ratio is greater than 115 percent. They will compare whether this would result in a higher “net present value” of the loan (to the bank or investors who own it) than other loan-modification options under the HAMP program.

So if your loan is being reviewed under the HAMP program, you’ll be considered. This program will allow some homeowners with negative equity to reap a reduction in the principal balance in steps over three years, if they remain current on payments.

To encourage lenders to opt for loan-balance reductions, the government will offer lenders 10 cents per dollar of principal written down above 140 percent LTV, 15 cents between that level and 115 percent LTV, and 21 cents for LTV reductions below that. Second liens that are more than six months delinquent will get a standard 6 percent incentive payment, according to the Goldman Sachs report.

When will all this start? Soon, the administration says, but there’s no set date. Some parts will be operational within the next few weeks, and all the elements (not all of which are discussed here) should be in place by this fall, the Obama administration says.

For updates and more information you can check the White House’s “home affordable” website. The site also has interactive steps to help you determine whether you’re eligible for government-backed programs.


Posted by Elvis on 03/27/10 •
Section Dying America
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