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Monday, August 19, 2013
Help for Homeowners Who Are Behind on Mortgage Payments
Help for Homeowners Who Are Behind on Mortgage Payments
Article From HouseLogic.com
By: Donna Fuscaldo
Published: June 14, 2013
The Making Home Affordable program offers
at-risk homeowners a chance to modify mortgages to avoid foreclosure on their
If you're behind on mortgage payments (or
about to be), which is putting you at risk of foreclosure, the Home Affordable
Modification Program (HAMP) could be your lifeline.
Making Home Affordable, the federal program
aimed at aiding struggling home owners, offers two options: refinancing (known
as HARP (http://www.houselogic.com/home-advice/refinancing/harp-refinancing/) )
and loan modification, which this article explains.
Unlike refinancing, HAMP pays your current
lender to rework your existing loan terms to lower your monthly payments.
But don't expect to breeze through the
qualifying process. You'll need a lot of documentation and patience.
Qualifications for HAMP
•Your home must be your primary residence.
•You must owe $729,750 or less on a first mortgage that was
originated on or before Jan. 1, 2009.
•You must also demonstrate financial hardship - such as a jump in
mortgage payments or a drop in income.
A loan modification makes sense if you
can't afford your current mortgage payment but could manage to stay current if
your monthly payment were lowered. Homes of up to four units are eligible, with
higher loan limits, as long as you occupy one of the units. HAMP is scheduled
to expire at the end of 2015.
If you've failed at a prior loan
modification, you may still apply for HAMP, so don't let an earlier bad
experience deter you from applying again.
The First Steps to Getting a Loan
HAMP begins with a trial phase. Contact
your lender to initiate the process, or call 1-888-995-HOPE to get free
assistance from a housing counselor approved by the U.S. Department of Housing
and Urban Development.
The lender will calculate a lower monthly
payment, which you must make on time for at least three months. After
successfully completing the trial phase, your lender should make the loan
While lenders may accept some undocumented
information up front to begin the process, eventually you'll need to file
detailed paperwork to earn a permanent modification. It's better to get your documentation
ready in advance. HAMP administrators say the leading reason trial
modifications fail to be made permanent is missing paperwork. ??Start by
gathering paperwork on:
•Your income (pay stubs)
•Expenses (mortgage statements, tax and insurance bills, debt
•Assets (bank and non-retirement savings statements)
You'll need that information to fill out
the Request for Modification and Affidavit
You also need to complete IRS form 4506T-EZ
(http://www.irs.gov/uac/About-Form-4506T-EZ), which allows your lender to
review your income tax returns.
File a Hardship Affidavit
(https://www.fanniemae.com/content/guide_form/1021.pdf) as well.
If possible, send all documents together in
one package by certified mail to your lender. That will lessen the likelihood
of lost paperwork and delays, says Nicole Hall, editor of LendingTree.com.
How Your Mortgage Payments Get Lowered
A lender can modify a mortgage in several
•Lower your interest rate
•Reduce your principal
•Extend the term of the loan
The basic goal is to use one or more of
these approaches to get your monthly mortgage payment, including real estate
homeowners insurance premiums, down to a more affordable payment. Lenders are
allowed to cut your interest rate to as low as 2%, if necessary. The average
HAMP modification has reduced monthly payments by $546.
To get a ballpark figure of how much a
modification might lower your monthly payment, run the numbers for yourself.
If, for example, your current mortgage payment is $2,000 and your monthly gross
income is $4,000, then you're paying 50% of your pre-tax income toward the home
loan. A typical modification to bring that figure down to 31% would reduce the
payment to $1,240, a savings of $760 a month.
If You're Already Facing Foreclosure
Even if you're already facing foreclosure
(http://www.houselogic.com/guide/foreclosure-faq/facing-foreclosure/), HAMP is
worth a shot. The foreclosure process is suspended while you're in the trial
phase of the modification.
Foreclosure can be avoided altogether if
you can demonstrate the ability to keep up with the new, lower payment and
graduate to a permanent modification. Keep in mind that the foreclosure process
can resume if you miss payments during the trial phase or fail to get approved
for a permanent modification.
Some owners won't be able to stay in their
homes, even with a mortgage modification. To avoid foreclosure
into the federal Home Affordable Foreclosure Alternatives
HAFA offers lenders financial incentives to
opt for a short sale
or deed-in-lieu (http://www.houselogic.com/home-advice/facing-foreclosure/foreclosure-alternative-deed-lieu/)
rather than a foreclosure. ??In a short sale, a borrower sells a home for less
than the outstanding mortgage, and the lender takes the proceeds and considers
the debt paid off. In a deed-in-lieu, the homeowner turns over the home to the
lender, and the mortgage is closed. Although neither option is ideal, either
can make sense if a loan modification isn't attainable or sufficient.
Learn more about stopping foreclosure from
our Foreclosure FAQ. (http://www.houselogic.com/guide/foreclosure-faq/)