Understanding Your Options
There are several options available to help you avoid foreclosure. You can discuss these with your lender but remember – the earlier you contact them the more options you will have to help you. You may not be eligible for all of these options but you and your lender can determine how best to move forward.
Making Home Affordable Program
The Making Home Affordable Program provides help to homeowners who are struggling with paying their mortgage payments or anticipating trouble. Find out if you are eligible for assistance through this program.
Workout Options
If the Making Home Affordable Program is not an option for you there may be other alternatives. By working with your lender you can determine if you are eligible for any of the following workout options:
- Refinance: If you have enough equity in your home, your new mortgage could pay off the old loan along with any late fees and attorney fees. If you decide to pursue a refinance, remember to shop around for the best terms and compare the Annual Percentage Rate (APR).
- Reinstatement: Your lender may agree to let you pay the total amount you are behind, in a lump sum payment and by a specific date. This is often combined with forbearance when you can show that funds from a bonus, tax refund, or other source will become available at a specific time in the future. Be aware that there may be late fees and other costs associated with a reinstatement plan.
- Forbearance: Your lender may offer a temporary reduction or suspension of your mortgage payments while you get back on your feet. Forbearance is often combined with a reinstatement or a repayment plan to pay off the missed or reduced mortgage payments.
- Repayment Plan: This is an agreement that gives you a fixed amount of time to repay the amount you are behind by combining a portion of what is past due with your regular monthly payment. At the end of the repayment period you have gradually paid back the amount of your mortgage that was delinquent.
- Loan modification: This is a written agreement between you and your mortgage company that permanently changes one or more of the original terms of your note to make the payments more affordable. The President's plan also offers loan modification, visit our page on the President's Making Home Affordable Program for more information.
Depending on your circumstances it may not be possible to keep your home. But there are still options available to you including to prevent foreclosure:
Short Sale or Short Payoff: In cases where you sell your home for less than you owe, your lender may accept the lesser amount.
- Deed-in-lieu of foreclosure: Your lender may accept the voluntary transfer of the title of your home back to them in exchange for cancellation of your mortgage debt. This approach may have tax implications for you, and it may not be possible if there are other liens against your home.
- Assumption: This option permits a qualified buyer to take over your mortgage debt and the mortgage payments, even if the mortgage was originally non-assumable.
Be aware that some workout options affect your credit rating more than others. Foreclosures, short sales and deeds-in-lieu of foreclosure are considered "not paid as agreed" and may have serious negative impact on your credit score. That is why it is important for you to get help early to try to prevent further damage to your credit. For more information about your credit and how alternatives to foreclosure may affect it, visit www.myfico.com.
Don't Give Up!
It is important you understand what foreclosure means and why it is so important to get help early to avoid it.
Foreclosure is a legal process by which the lender takes back ownership of mortgaged property (for example, a home) and sells it because a loan is in default, or in other words, because the owner is delinquent with the mortgage payments. The process of foreclosure is different in every state. In some states, a non-litigated foreclosure can take as little as 32 days. In other states, it's a process that could take more than a year. In either case, the results can be devastating:
- You would lose any equity in your home. If you have equity in your home or your home has increased in value since your purchase, a foreclosure could mean the loss of thousands of dollars in equity.
- Your credit score would take a big hit. With a foreclosure on your credit history, you will have future difficulty borrowing money, renting an apartment, and perhaps even getting a job.
- Finding a new home will be a challenge. Not only must you find some place that's affordable, you'll also need to come up with a rental deposit, which the landlord could drastically increase, based on your credit rating.
- The interest rates on your credit cards could increase as the credit card companies view you as an increased risk.
- You could even be hit with a bill for taxes on the amount of mortgage that the lender was never able to recover from the sale of the property.
The Homeowner Affordability and Stability Plan (HASP) aka the Making Home Affordable Plan (MHAP) is the government's solution to stabilize the housing markets. The Obama housing plan is supported by the following programs:
- Home Affordable Refinance - Access to low-cost refinancing: to provide aid to qualifying homeowners so that they can access low-cost refinancing, the Obama's housing plan makes it possible for individuals to refinance their mortgages even if the equity in their property has fallen below "conforming loan" standards:
The HASP helps homeowners who owe more than 80% of the value of their homes (i.e. their equity is less than 20%) secure lower monthly payments by refinancing their mortgages at the historical low rates available today (around 5.36% as of 7/15/09).
- Home Affordable Modification Plan (HAMP) - Homeowner stability initiative: HAMP ; The housing plan calls for the government to invest $75 billion to provide incentives to mortgage lenders and qualifying homeowners to modify the terms of their loans through term-interest rate reduction (lower interest payments on their mortgages and longer periods of repayment) or principal reductions:
The Obama housing plan sets aside the $75 billion to help "responsible" homeowners avoid foreclosure. Who will these money help? In general, homeowners that are struggling (or are likely to struggle in the near future) to make their mortgage payments either because of a change in their situation (e.g. loss of income), or because the terms of their mortgages called for much higher monthly payments after an introductory period, as it was rather common in the sub-prime mortgage market. .
- FHA - Home Affordable Modification Plan (FHA-HAMP): Homeowners who have Federal Housing Authority (FHA) insured loans are able to take advantage of the HAMP and modify their loans if they are 1 or more months late/delinquent in their payments. Go to "FHA-Home Affordable Modification Plan" page for details of the plan.
- Home Equity Loan Modification (Second Lien Program) - Making Home Affordable: the housing plan was augmented to expedite modifications of first mortgages and to make it possible for homeowners that have home equity loans or other second liens on their properties to stay in their houses. The HASP offers a Second Lien program that provides incentives for services to modify or extinguish second liens once a first mortgage has been modified:
The government estimates that approximately 50% of all homeowners eligible for the housing plan's mortgage modification program have second liens (1 to 1.5 million). By introducing incentives to modify those loans, the program is expected to help those homeowners reduce their payments even further, and to improve the chances that the mortgage modification program would work.
- Keeping Mortgage Rates Low: To maintain mortgage rates at historical low levels the housing plan calls for recapitalizing Fannie Mae and Freddie Mac with another $200 billion, and increase their ability to purchase conforming loans. The HASP's goal of reducing mortgage rates is actively supported by the Federal Reserve through the purchase of conforming loan securities in the secondary markets:
The Obama housing plan is providing $100 billion in capital to Fannie and Freddie each through the Treasury, in the form of preferred stock. Furthermore, the portfolio size of the two GSE's (Government Sponsored Enterprise aka Freddie Mac and Fannie Mae) will be increased by $50 billion to $900 billion. In addition, the Federal Reserve has committed to buying $300 billion in long-dated treasury securities with the intent of keeping interest rates low - an effort that is succeeding.
LOWER YOUR PAYMENTS WITHOUT REFINANCING
A modification package prepared by the U.S. Financial Relief Center will assist you in lowering your mortgage payment by decreasing your interest rate, extending the terms of your loan, having delinquent payments applied to the back-end of the loan, forbearance of principal and in some cases, even a permanant reduction of principal.
Our modification packages are prepared for success. Each package contains a "win/win" proposal clearly showing the benefit of modification for you and your lender, a monthly financial breakdown of your current income and expenses, showing exacly how your hardship affected your financial situation, and a custom hardship letter written in terms your lender can understand.
An achievable modification is obtained by ensuring you qualify for assistance. After qualification comes verification of your hardship and current finances thru a modification package. Your package has to be complete and perfect in every way. If not you will not be successful. Thousands of homeowners are applying for assistance daily. You have one chance at this. It is crucial that you obtain the assistance needed to stay in your home.
NEW PROGRAMS HAVE RECENTLY BECOME AVAILABLE!
The Making Home Affordable Modification Plan, released March 4, 2009 was implemented to help 3-4 MILLION struggling homeowners obtain an affordable mortgage payment through a combination of interest rate reductions, extending of loan terms to up to 40 years and at the discretion of the lender, forebear a portion of the principal balance to attain a mortgage payment of 31% of your gross monthly income. Contact us today to learn more about this exciting new program!
AVOID FORECLOSURE AND PRESERVE YOUR CREDIT STANDING
Your home is your most important asset. A Loan Modification will bring you current on your mortgage and has no negative impact on your credit standing.
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