I keep hearing about programs to help homeowners hit by this crisis. What sort of government assistance is available for help with my mortgage?
As of today, there are several government programs that can help with your mortgage. There are two distinct types of programs available. Refinancing and streamline and loan modification programs. To find out which program is right you, first you need to know who owns your mortgage. If you have a Fannie Mae or Freddie Mac loan you would fall under that program and if you have a loan owned by the FDIC (Indymac) then you may qualify for their program.
Hope For Homeowners Loan Program Congress created the HOPE for Homeowners (H4H) program to help those who are 90 days or more behind in payments, refinance into more affordable, long term loans. H4H is an new mortgage designed to keep troubled borrowers in their homes. It is not a loan modification.
Here is how the program works:
A delinquent borrower can go to their lender and ask for them to accept 90% of the current appraised value while at the same time get a new lender to make a 30 year loan under this program. This will decrease the payments to an affordable level. Any appreciation in the home is shared between the homeowner and the government.
The program is effective from October 1, 2008 to September 30, 2011. [ FDIC Loan Modification The FDIC announced a program on November 15, 2008 that promises mitigate losses to the Government and help people stay in their homes. This program includes cash incentives to loan servicing companies and Government share in potential losses.
To qualify for the program you must have a loan that the FDIC administers and be at least 60 days behind in your mortgage payments before the end of 2009.
The FDIC will restructure your payments so that they are no more than 31% of your income. Interest rates can be set to 3% for 5 years. There is no principal reduction, rather the excess in the "affordable" loan balance and actual balance is added on to the loan at the end or when the home is sold.
Fannie Mae and Freddie Mac Loan Modification## The Fannie Mae and Freddie Mac program is for homeowners that are at least 90 days behind in their payments and owe at least 90% of the homes value.
With this plan, the Government will allow you to have a lower interest rate and principal deferment. Debt ratio targets for this program is 38%. This means that your mortgage payment including tax and insurance can not be more than 38% of your income. You must live in the house and not be in bankruptcy.
There are other programs available from private lenders. The first step is to contact your lender and ask if you qualify for any assustance. You can also hire a professional loss mitigation company or attorney to work out your loan. Be wary of paying up front fees for this service.
Go to the HUD website and look for Housing Counselors in your area. If it is a HUD approved counselor they should be able to help with Loan Modifications, Repayment Plans, Forebearances, Short Sales, Relocation etc. It may also be possible to receive some financial assistance, depending on the organization.
I work at one of those agencies and we've had great success working with the mortgage companies, but there is no guarentee because it is entirely up to the mortgage company if they agree to work with you. Also, we are overwhelmed with requests for help so you must be patient and take the initiative to keep in touch with your counselor.
The single most important thing is DO NOT WAIT BEFORE YOU ASK FOR HELP. For one thing, if you have a foreclosure date within the next month, then it hardly allows time to take action, and the other thing is that if the counselor does take action to help you due to the emergency situation, then they have to put all their other clients on hold who have been patiently waiting for assistance.