HELP FOR DISTRESSED HOMEOWNERS - BUT ONLY FOR SOME OF THEM!
NEW FEDERAL AND STATE PROGRAMS OFFER HOPE - BUT NOT EVERYONE CAN BENEFIT!
Several new government programs are designed to help homeowners behind on their mortgage payments, possibly facing foreclosure. But help is not universal. Lenders have to agree to participate, for one. And, those in distress do need a provable stream of income to qualify - little is available for those unfortunate enough to have recently lost their jobs.
Here is a short summary of several assistance programs currently in place. The Federal Deposit Insurance Corporation (FDIC) and The White House are considering other options as well, but the details of these plans have yet to be agreed to by the FDIC and the Bush Administration. However, all involved feel quick passage is in order, and agree that it is not prudent to wait on relief implementation until after President Elect Obama is sworn in next January.
HOPE FOR HOMEOWNERS
Geared for those whose mortgage balances exceed their home's current market value, this $300 Billion program will refinance defaulting loans into new, competitive-rate, 30-Year Fixed Rate Home Loans insured by the Federal Housing Administration (FHA).
The new mortgage cannot exceed 90% of a home's new market value as appraised, and lenders will likely have to write down a portion of the outstanding debt. Participation by the lenders is strictly voluntary, and the new mortgage amount cannot exceed $550,440.
Some lenders may choose not to write down loans, preferring instead to renegotiate the old loan's rate of interest, while keeping the outstanding balance the same.
Another potential snag - many defaulting borrowers also have high-rate piggyback loans, popular a couple of years ago for borrowers who had little down payment, but didn't want to purchase costly Private Mortgage Insurance required for those with less than 20% down payment. Such loans are rarely available today.
The lender on the piggyback mortgage, often a different financial institution, will have to release their lien on the property in order for the buyer to qualify for the new loan.
And, importantly, the homeowner would have to agree to share a portion of future home appreciation with the government, subject to certain new guidelines, when they later decide to sell.
This program runs until the end of September, 2011.
FHA SECURE
This program, introduced about a year ago, offers distressed homeowners, either current or delinquent on their non-FHA adjustable rate mortgage, a new, competitive, fixed rate FHA loan. The amount of the loan depends on the borrower's specific financial situation, as well as the market value of their home.
This program is due to end December 31st of this year, but may be extended. It may also be expanded to those with fixed rate loans, not just adjustables. Check out the FHA/HUD Website for more info on this program.
HOPE NOW
"Hope Now" represents a public-private partnership of mortgage servicers, housing counselors, and investors who assist distressed borrowers who have not been successful, or are reluctant, to talk directly to their lenders. Callers to a 24/7 Hotline - 888-995-HOPE - receive help in communicating with their mortgage company, or are directed to a special housing counselor.
ILLINOIS STATEWIDE FORECLOSURE PREVENTION NETWORK
This State of Illinois program offers counseling to borrowers in or near mortgage default. It works with lenders to refinance these borrowers into new 30-Year Fixed Rate loans at competitive interest rates, and no more than $1,000 in out-of-pocket closing costs. There would be no pre-payment or recapture penalties as well.
This program is for those who have heretofore kept up with their mortgage payments, but are afraid a reset on their adjustable rate loan would make their new house payments unfordable. Minimum FICO Credit Score required - 590. The number to call for information - 877-793-3470.
In addition, many local housing advocacy organizations intervene directly on behalf of troubled borrowers to get their now-unfordable mortgage loan modified. Many of these organizations have established direct contact with decision-makers at many lenders and mortgage servicers, to make the process of negotiating new loan terms far easier.
Here's a link to HUD-Approved Housing Counselors in IL.
Please read Mary Ellen Podmolik's story in last Tuesday's Chicago Tribune for more info.
DEAN MOSS & DEAN'S TEAM CHICAGO
