If you’ve tried negotiating with your mortgage lender, have adjusted your budget, and done everything in your power to pay your house note, but have still come up short – it may be time to seek government assistance.
Part of President Barack 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.
Are You Eligible for a Loan Modification or Refinance?
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)
- 1-800-FREDDIE (8am to 8pm EST)
The Obama administration says its plan will help as many as 5 million homeowners refinance their mortgages and save their homes. The government’s loan modification program is designed to lower your interest rate to below 5% — perhaps as low as 2% — so that your payment is no more than 31% of your gross income.
Advice for Those With Delinquent Mortgages
- 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.
- Contact a HUD-Approved Housing Counselor
If you get stone-walled in trying to negotiate directly with your lender or loan servicer, you’re not alone. The same thing has happened to millions of people. To minimize your frustrations and possibly receive faster help, get a trusted third party involved. Contact a reputable non-profit agency, such as the National Foundation for Debt Management (NFDM), a non-profit agency with HUD-approved housing counselors that can offer you free assistance. Reach NFDM at http://www.NFDM.org or 866-409-6336.