I came across something recently that I thought might help a few people, at least. I’m not sure how well publicized it is, so I figured I would pass it on.
One of the problems with the recent help for homeowners is that only certain people, those in foreclosure or those who do not owe more than 120% of the house’s value, could get help. This has been a problem for those people who are paying their mortgages and doing the best they can but are deeply underwater – the mortgage is considerably more than 120% of what the house is worth.
This is going to change over the next few months and should be in full swing by fall, from what I understand.
These adjustments are to the Home Affordable Modification Program (HAMP) and to the Federal Housing Administration (FHA) programs. They will help people who are significantly underwater on their mortgages.
Eligible homeowners for modifications under HAMP must live in an owner occupied principal residence, have a mortgage balance less than $729,750, owe monthly mortgage payments that are not affordable (greater than 31 percent of their income), be current on their mortgage, and demonstrate a financial hardship. For these homeowners, there will be greater flexibility in restructuring loans, and the final loan payment for all loans associated with the house must be less than 31% of the owner’s income. This will be achieved by actually decreasing the principal owed. The foreborne (forgiven) amount will be written off over three years as long as the homeowner stays current on payments. There are other ways the bank can modify the loan, but this is a new option for them. This is a voluntary program for lenders, but if you are having a hard time paying your mortgage you can begin talking to your bank about this.
There are also new programs to help people who are unemployed homeowners and people in danger of foreclosure. The people in danger of foreclosure may be eligible for a short sale or deed-in-lieu of foreclosure, which aren’t nearly as bad for your credit scores as a foreclosure can be.
If you are in this situation, good luck – it’s a hard place to be.