Ask The Money Coach

Part of President Obama’s $75 billion mortgage rescue plan is aimed at helping people avoid foreclosure – by either refinancing their house notes or modifying their loans. Many lenders, large and small, are even agreeing to delay foreclosure proceedings for homeowners that meet certain criteria. To find out if you’re likely to qualify for government assistance under the Home Affordable Modification Plan, visit http://www.MakingHomeAffordable.gov. This is where you can find out if you qualify for a loan refinance or a loan modification under President Obama’s housing plan.

To be eligible for a loan modification, you have to meet at least five criteria:
- the home must be your primary residence
- you must owe less than $729,750 on the home (the federal limit)
- you must be having trouble making payments (but you don’t have to be late)
- your mortgage must have been received before Jan. 1, 2009; and
- your total housing payment (principal, interest, taxes & insurance) must now exceed 31% of your gross income

To be eligible for a loan refinance, your existing mortgage must also be owned or insured by Fannie Mae or Freddie Mac. (That is not a criteria for a loan modification). To find out if your home loan is owned or insured by Fannie or Freddie, contact:

• 1-800-7FANNIE (8am to 8pm EST)
• www.fanniemae.com/loanlookup

or

• 1-800-FREDDIE (8am to 8pm EST)
• www.freddiemac.com/mymortgage

Get your documents in order

Once you determine that you’re eligible for a loan modification, pull together a slew of paperwork: paycheck stubs, your last tax return, recent mortgage statements, an itemized list of your expenses, as well as anything that substantiates your financial hardship – such as those large medical bills, and a letter describing why you fell into trouble in the first place (i.e. a loss of income, etc.). You’ll need all these documents to backup your request for help. Only your current lender can modify the terms of an existing mortgage.

Be prepared for a slow process

One thing to keep in mind is that a loan modification is not mandatory. Lenders are doing these on a “voluntary” basis. Therefore, banks don’t have to reply to you in, say, 30 days, or even in 60 days. However, banks are getting “incentive” payments to do workouts/loan mods, so when President Obama launched this housing rescue plan, nearly all the major banks got on board and agreed to further postponements and freezes on foreclosures. Many of them signed agreements to participate. Here is a list of lenders/loan servicers on board with the program, according to the MakingHomeAffordable.gov website: http://www.makinghomeaffordable.gov/contact_servicer.html.

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 Lynnette Khalfani-Cox, The Money Coach is a personal finance expert, speaker, and author of numerous books on personal finance. She appears frequently as an expert commentator on television, radio and in print.