Refinancing Options for Homeowners

I’ve posted before (in 2009!) about the HAMP Program for loan modification, and how it can help homeowners who wish to keep their homes, but can not afford to make the same payments they had originally agreed to.  Of course, since then, there have been many changes to the programs offered, and who they service.  Originally, the goal was to help homeowners who were facing financial hardships and could not make their mortgage payments.  At first, no one, especially the lenders,  knew what they were doing.  Many homeowners were frustrated, and chose “walking away” from the home because it was so difficult to accomplish any real changes to the mortgage.

Fast forward 2 1/2 years.  The game has changed, and so have the programs.  There are a few major programs available, with a few acronyms to help you remember what they are.  As always, you will want to speak with your lender about the proper program for you, and also verify that your lender offers these as an alternative to foreclosure.

HAMP Program:  The Home Affordable Modification Program is available for homeowners who are employed, but are still having a hard time making ends meet.  Currently this program is being modified and enhanced, and new guidelines are expected in June 2012.  In order to qualify for this program, there are a few requirements:

•  You occupy the house as your primary residence.
•  You obtained your mortgage on or before January 1, 2009.
•  You have a mortgage payment that is more than 31 percent of your monthly gross (pre-tax) income.
•  You owe up to $729,750 on your home.
•  You have a financial hardship and are either delinquent or in danger of falling behind.
•  You have sufficient, documented income to support the modified payment.
•  You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

HAFA Program: The Home Affordable Foreclosure Alternatives Program is available for owners who can not afford their payments, and have not been approved for HAMP.  This programs helps owners pursue a short sale, or Deed in Lieu of Foreclosure with their lender. There are a few advantages to using the HAFA program, one is that the debt is released if the lender accepts the short sale, and the owner is less impacted credit-wise than a traditional short sale or foreclosure. Some of the requirements for this program are:

• You live in the home or have lived there within the last 12 months.
• You have a documented financial hardship.
• You have not purchased a new house within the last 12 months.
• Your first mortgage is less than $729,750.
• You obtained your mortgage on or before January 1, 2009.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.

HARP Program:  The Home Affordable Refinance Program is available for homeowners who are current on their mortgage payments, but do not qualify for typical refinancing because their loan values have declined with the housing market.  This refinance does have fees, but it is a good alternative for owners looking to change their mortgage payments and would be unable to do so based on current loan to value ratios.  This program will end on December 31, 2013.  Some eligibility requirements are:

• The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
• The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
• The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
• The current loan-to-value (LTV) ratio must be greater than 80%.
• The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.

Principle Reduction:  The Principle Reduction Alternative is an alternative to foreclosure if the owner does not have a loan backed by Fannie Mae or Freddie Mac.

• Your mortgage is not owned or guaranteed by Fannie Mae or Freddie Mac.
• You owe more than your home is worth.
• You occupy the house as your primary residence.
• You obtained your mortgage on or before January 1, 2009.
• Your mortgage payment is more than 31 percent of your gross (pre-tax) monthly income.
• You owe up to $729,750 on your 1st mortgage.
• You have a financial hardship and are either delinquent or in danger of falling behind.
• You have sufficient, documented income to support the modified payment.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

There are many other programs available for homeowners.  Whether you are unemployed, you have a second mortgage that you can’t afford, or you have an FHA or VA loan; there is help.  To find the right program for you, follow this link for an interactive tool to help you choose the modification program that best fits your unique situation.  Remember, Realtors (especially those with the SFR designation) are professionals who help homeowners every day.  We have tools and knowledge to assist in a very stressful, and difficult situation.

You can also try to negotiate a Deed in Lieu (DIL) of foreclosure with your lender. The  DIL is essentially similar to a voluntary repossession of a car.  The owner can’t afford to make the payments, so they return the property back to the lender.

Please be aware, there are scams out there.  Unfortunately, there are many who try to take advantage of those who can least afford it.

• Please be wary of any person or entity taking money for their services.  To work with your lender to achieve a loan modification is free.
• Use caution if people are pressuring you to “sign over” your house, in order to save it.
• Work directly with your mortgage company for any payments.  Do not make mortgage payments to anyone that is not YOUR lender without your lender’s direction.

To reach a HUD-certified counselor, please call 888-995-HOPE (4673)

As always, please feel free to contact me if you have any questions, I am always happy to help!