Holding On to Your Home with Home Affordable Refinance or Modification
President Obama, as one of his first orders of business when he took office, proposed a $787 billion stimulus package which was passed by Congress in record time. Part of that stimulus bill is a $75 million program called Home Affordable Refinance and Modification and it is designed to keep people in their homes and stem the tide of foreclosures.
How does it work? There are a few requirements that you need to meet if you are going to take advantage of this landmark program. First off, your mortgage needs to be owned by one of the failed financial giants that started this whole crisis: Fannie Mae or Freddie Mac. The property has to be owner occupied (not an investment property) and the first mortgage on it cannot be worth more than 105% of the current value of the home. If you qualify and take advantage of this program to refinance your mortgage and get lower payments you cannot take any cash out from the new mortgage to pay other debt.
As you can see by the guidelines of this program it is designed to help homeowners who are at risk of losing their primary residence. There are a lot of hard working people out there who pay their mortgages on time and are unable to refinance because the value of their home has gone down dramatically in the past six months. Mortgage rates today are lower and offer them a way out but refinancing is not always an option.
This plan by the Obama administration is designed to help over nine million homeowners stay in their homes but it will not help everyone. If you’re an investor you’re pretty much on your own but if you’re losing your home due to a lack of income you do have some options. You can contact a HUD-approved housing counselor at the Department of Housing and Urban Development and explore the following options:
Forbearance: You pay only a portion of your regular payment or no payment at all for a certain period of time and make your regular payments after that plus an amount towards the payments you shorted or missed. This type of program works really well if you are currently laid off but certain you’ll be back to work within a set time frame.
Repayment: If you have missed payments and are under a threat of foreclosure your mortgage lender may help you make a plan to pay back the missed payments over a period of time.
Pre-Foreclosure Sale: Selling your property “short” of what the mortgage value is in order to get out from under. You can refinance the remaining amount and save your credit report from taking a damaging foreclosure hit.
Deed in Lieu of Foreclosure: Avoid the foreclosure process completely and simply sign the deed over to your mortgage company if they’re willing to take it.
There are other avenues you can explore with the aid of a HUD counselor including special mortgage relief assistance for active duty military service members. The important thing to remember is that there is help available for you and you do not have to lose your home. This assistance is free so beware of any foreclosure rescue plans where they ask you to pay a fee. Go to http://www.makinghomeaffordable.gov/ for additional information.
