The Federal Government has put in place a number of programs designed to help homeowners avoid foreclosure (HAFA, HOPE, HFA) on a federal level and has also provided individual states with broad latitude to fine tune aid to what their citizens need.

Lisa Madigan, the AG of Illinois, is focusing on providing Illinois citizens at risk of losing their home with practical information to help them help themselves. She recommends a three step process troubled borrowers should follow to improve their chances of keeping their home: 1) Gather Information, 2) Develop a Plan, and 3) Present the Plan. Let us review what this three stage process entails.

If you are going through financial difficulties and are at risk of losing your home you are going to have to work hard to have a chance of saving your home. It is a good idea to view the work involved in avoiding foreclosure as your job; a job with excellent wages and benefits: a home for you and your family.

Gathering Information.

Organizing yourself and knowing where you stand is probably the most important single step you can take to save your home. It will give you a clear picture of your situation and provide you with the arguments to present a solid case to your lenders. This information will also be useful for legitimate financial counselors when they assess your case.

1.)    General Information.

What kind of information will you need to provide?

Your will need:

a)      Your current mortgage payment.

b)      Property taxes and homeowners insurance.

c)       The date of the last payment you made (make sure you know what month the payment was for)

d)      The number of months you are behind.

e)      All court papers and notices you have received.

f)       Details on your loan: type of rate (fixed or variable), current interest rate (5%, 7%…), size ($100,000, $500,000…), length (10, 20, 30 years)

g)      If your loan is an adjusted rate loan (ARM) when will the mortgage rate reset?

Once you have this information you will have a more realistic view of your financial situation. Some homeowners are so scared about the possibility of losing their home they choose to ignore their situation and stick their head in the sand and pretend nothing is wrong until it is too late.

With this information you can now go on to the next stage of gathering information: creating a budget.

2) Creating a budget.

Sit down and work out what your income is. Lenders will be very interested in this when they work out what payments you are able to make if they refinance or modify your loan.

Write a report on your jobs and sources of income; make sure you include the time you have been employed, the consistency of the income, your gross and net income, government benefits, and any child support. Provide evidence for every source of income.

List all your expenses. It is common to underestimate monthly expenses; be thorough and try to provide bank statements to back you claims. Include what you spend every month on food, utilities, clothing, insurance, medical expenses, transportation, pet expenses, charity, student loans, child care…

At this point you should revise your budget and make sure you have documentation that supports your claims. Make sure you include recent mortgage statements, the last two months’ pay stubs for every working household member, tax returns for the last two years, bank statements for at least two months, and your current utility bills.

After working hard gathering all this information you are now ready for the last step of this step: Writing your hardship letter.

continued from: Illinois Government Help: Three Steps to Saving Your Home

Writing your hard step is an important step on the road to saving your home. Many homeowners feel lost for words on what to say and how to say it. Writing an effective hardship letter is not easy but it is so important when negotiating with your lenders it is a step you cannot ignore. Lisa Madigan, AG for Illinois, provides this guidance for homeowners that are writing their first hardship letter.

Write clearly, be brief, and address these basic questions in your letter.

-          Why are you not covering your mortgage payments? Explain the hardship you are going through and how it is stopping you from paying your loan.

-          Is your hardship temporary or a permanent condition? This is a key question your lender will want answered. Temporary situations include losing your job, a hefty medical bill, or an illness that has put you out of work for some time. Permanent conditions include the death of a contributing family member, a chronic health problem, and so on.

-          How long have you been living in the house? This will help your lender assess how committed you are to your home.

-          Do you want to remain in your home? Here is where you present your case for keeping the home and explain why staying in your home is so important for you. The rate of re-defaulting on homeowners that are offered a mortgage modification is high, and the process is expensive, so lenders want to be as sure as possible you are serious about keeping your home. Include reasons why living in your house is important: your sick parents live nearby, you do not want to change your children’s school, it is your family home, and so on.

-          If you do not want to keep your home, explain what options you are considering to pay back the loan. Is the house on sale? Will the price you are offering it at cover the mortgage balance?

-          Explain what you have done to plan your mortgage payments. Provide a summary of your budget and explain what cuts you have made to try to pay your mortgage.

-          Do you have savings you can include in a repayment plan?

Once you all your information gathered and have written (and sent) your hardship letter you are ready for step 2: developing a plan.

For more information on the information package provided by the Illinois AG check Lisa Madigan’s website.

Illinois Mortgage Help and Illinois Homeowner’s Rights

Photo by erjkprunczykMost US states are providing their citizens with targeted help in avoiding home foreclosures. If you are a resident of Illinois struggling to make your mortgage payments and want to avoid foreclosure you should be interested in this information. Each state has different laws that regulate foreclosure procedure; make sure you know the law of your state.

In the state of Illinois the law requires lenders to provide homeowners with information on their legal rights and explain what options they have when filing a foreclosure claim. This notice (see reference below) must include a detailed description of the homeowner’s rights and practical advice on the next steps they can take. These rights include:

The right of possession.

This means a homeowner can live in his house until a judge files an order for possession. No bank, loan servicer, or debt collector can force you out of your house; only a judge can. Illinois law specifically bans power sales without a judicial foreclosure. According to the Illinois mortgage foreclosure law (see reference below) anyone who “threatens to injure the person or property of occupants or mortgages real estate, or knowingly gives such occupants false and misleading information or who harasses or intimidates such occupants, with the intent of inducing such occupants to abandon the mortgaged premises, in order to obtain a finding of abandonment under subsection (b) of Section 15?1603 or subsection (d) of Section 15?1706 of this Article, shall be guilty of a Class B misdemeanor.

Ownership rights.

You are the owner of your home, not the bank, at least until the court says so. This means you are in the driving seat; you decide what is done to your property until the court decides on the foreclosure.

Reinstatement Rights.

You have the right to pay to bring the mortgage current within three months of your court summons.

Redemption rights.

In Illinois you have seven months from the date the foreclosure was serviced if you live in the house; six months if it is not your primary residence; or three months after the foreclosure judgment is entered.  Remember, during this time you have the right of selling, refinancing, or paying the loan in full. This means you have up to seven months to find a solution from the foreclosure process begins; good reason to start working on a solution as soon as possible.

Rights of Foreclosure Surplus.

If your home does foreclose and your house is sold, you have rights over any surplus remaining after the mortgage and any additional expenses are paid.

Payoff Amount rights.

Once you receive your foreclosure notice you can request a written statement of the total amount needed to pay off your mortgage. The bank or servicers must reply to your request in 10 business days from receiving the payoff amount request. The first request is free. It is useful to know the exact amount you owe on your home, as it gives you a specific target to aim for when refinancing, selling, or modifying your loan.

If you would like more information on your legal rights as a homeowner you can visit the Illinois Attorney General website which provides help for Illinois homeowners (see reference below).

Illinois Mortgage Payment Help

Photo by wallyg
Photo by wallyg
Photo by wallyg

Photo by myoldpostcards
Photo by erjkprunczyk

References:

Illinois Mortgage Foreclosure Law

Fact Sheet attached to foreclosure home notices in Illinois.

Example of Mortgage Foreclosure Summons.

Illinois AG, Lisa Madigan, aid for homeowners.

Mortgage Reduction Program By Bank of America

In the event that you have a loan from Bank of America or Countrywide and happen to be 60 days or more past due, an individual could be eligible for a the new earned principal forgiveness plan. Potentially about 95% of the financial loans Bank of America services for confidential investors in which the individual investor provides delegated power to the bank could be eligible. The actual kinds of loans that could be eligible consist of pay option ARMs, prime two-year cross types home loans and subprime home loans originally provided by Countrywide.

1.5 Million Late On Obligations
However, the brand new application will not become available till May and Bank of America is going to be managing the outreach to you personally should you be eligible. There are 1.5 million borrowers two months or more late on their obligations, however not necessarily each one of these borrowers may be eligible. Right at this moment the bank estimates perhaps 45,000 clients will, in the end, be eligible for this particular plan leading to close to $3 billion dollars of principal being reduced, given all the users invited to participate, accept and complete this program.

Earned Principle Forgiveness
The actual focal point of these innovations is a plan of earned principal forgiveness which handles seriously underwater home mortgages that have some of the greatest rates of delinquency.
The earned principal forgiveness plan is going to be provided as part of Bank of America’s National Homeownership Retention Program, that will become available in 44 states plus the District of Columbia. The plan will be included with the bank’s federal government’s Home Affordable Modification Program (HAMP). The bankers are convinced it can function as a model for additional loan modification applications at Bank of America and also at additional banks.

How Mortgage Reduction Program By Bank of America Works
1. For those who have a pay option ARM the bank will probably review your negative amortization account. Together with these plans indivdual borrowers could defer interest payments which are held in negative amortization accounts. Included in the HAMP modification, the bank will remove this element and forgive all or part of the adverse amount to relieve principal to as low as 95% loan to value.
2. Pay option ARMs may be recast to get rid of the negative amount and changed into entirely amortized loans.
3. If the principal balance of the loan is more than 120% Loan to Value the bank will take into account a set-aside of up to 30% of the principal as a possible interest-free forbearance of principal. The total amount reserved interest-free may qualify for possible forgiveness.
4. On top of that to pay out option ARMs, a few prime two-year hybrid loans and Countrywide home mortgages will be a part of the deal.
5. So long as you make your loan payment on time during the five year period designated by the bank, it’s possible all the interest-free principal which was put aside is going to be forgiven. Whether all is forgiven is determined by the worth of your home in the fourth or fifth year.
Crunch The Numbers
So let’s crunch some numbers and check out how this will actually work. For example: a home today worth $200,000 but with a mortgage of $250,000 has depreciated in value by $50,000. With this situation $50,000 will be put aside as an interest-free forbearance of principal. On identifying the HAMP payment the bank would certainly use a $200,000 LTV to create the new home loan mortgage payments.
Provided that homeowners still pay the loan promptly over a five-year period, every year 20% of the interest-free principal put aside will be forgiven. For instance, at the conclusion of the first year $10,000 will be forgiven. This would carry on each year provided that the forgiven amount doesn’t decrease the principal below 100% of the current market worth.
During years four and five, if the marketplace has increased in value, a portion of the principal might not be forgiven. Suppose in year four the home price has went up in value by $20,000. Now the home is worth $220,000, the remaining $20,000 in the interest-free account will not be forgiven.

To Qualify Mortgage Reduction Program By Bank of America
In order to be eligible for the principal forgiveness, home buyers must meet all the pre-qualifications for the new HAMP plan. Individuals will have to show they’ve a hardship and can’t pay for their present home loan mortgage. Bank of America has discovered with out forgiving principal on seriously underwater home mortgages, individuals may not recognize a modification.
Perhaps Bank of America may discover this plan more productive and expand it to a lot more prospective homeowners in arrears. Additional banks also need to have a look at this new revolutionary plan and embrace it.

Modify Second Mortgages by JPMorgan

For those of you borrowers out there that are struggling with one payment to the other, there is now hope as you can modify second mortgages by JPMorgan as of March. With a struggling economy and several people losing their homes to foreclosure, it seems as if these struggles will never come to an end. However, JPMorgan is taking the first small steps needed to begin implementing a recovery for borrowers to be able to keep their homes and repay their loans. These modifications apply to second lien mortgages, home equity loans, and various other second mortgages. Also known as the Second-Lien Modification Program, or 2MP, it proposes to lessen interest rates and payments on first and second mortgages, or several other outstanding home loans.

Applying for 2MP by JPMorgan
In order to qualify to modify second mortgages by JPMorgan, you will need to first apply for a trial modification on your first mortgage on your home. If you are approved, you will need to complete the trial, deeming you are “permanent” modification. The modification program is only eligible for those borrowers that are struggling with their mortgages but have continued to maintain interest payments. This is a small step in what could be the beginning to the end of the mass of foreclosures sweeping the Nation, but for some it doesn’t seem to offer much hope. With the assumption that about half of the distressed homeowners in the US have second mortgages, there is potential to cover about 85,000 second liens, leaving millions outstanding without the help they need.

Incentives to Lenders
There are also incentives for the lenders as the 2MP provides to the lenders that have made what is termed as “piggyback” loans. These are called so as they are sort of like carrying the borrower on, despite the debt based on small payments towards interest. Basically, if the borrower had a second mortgage and were allowed to make a small or even no down payment at all during what is known as the housing boom, the lender that provided that second mortgage is eligible for the 2MP. These incentives encourage lowering borrower’s payments, assisting the borrowers in making easier payments. When the housing market peaked, there were customers with less than satisfactory credit getting these second mortgages.

With borrowers offered to modify second mortgages by JPMorgan, there is a small advancement in the movement towards increasing the ability for a homeowner to remain in their home. Part of Obama’s initial plan, there are other banks that have taken on the fever of participating in the program. JPMorgan is only the third large bank to take part, however, showing the reluctance of these banks to take part due to the potential liabilities that are imposed on the bank. The government is offering the various incentives in order to offset these liabilities a bit, but it will take some time for other banks to decide to take the movement and participate in 2MP. This could be the future of keeping your homes for good.

Making Home Affordable program Changes; An Overview

The U.S Administration has recently announced several significant changes to the MHA program and the FHA refinancing program. According to the Administration press releases these changes are designed to:
A) Improve the efficiency with which the program provides temporary aid to unemployed homeowners that are looking for work.
B) Encourage and incentivize servicers to reduce principal balances of underwater mortgages.
C) Incentivize servicers to join the program.
D) Try and help them find another house if loan modifications do not work and they foreclose on their mortgage. This also includes minimizing the damage to troubled borrowers’ credit rating by finding alternatives to foreclosure.

When will these enhancement start working? Some, like the increased payments to servicers and junior liens that allow for short sales to go through, are already operational. However, other sections of the program will not be available until September/October.
Where can you learn more? This article only provides a basic overview of the changes to the program. For more information check the MHA official website for the latest news. If you have a personal interest in this program you might have some questions on how these changes will affect you personally. Here are some answers to the most frequent questions borrowers ask.

I am out of work and I am finding it hard to afford my mortgage payments; how will the new Temporary Assistance for Unemployed Borrowers help me?
This program will require lenders that are part of the program to provide a three to six months forbearance for eligible unemployed homeowners. During this time the mortgage payments will be downsized to at least 31% of their monthly income. Once this forbearance period has expired they will be assessed for eligibility on the HAMP modification program. This program will help unemployed borrowers to keep their homes while they are looking for work. If they are unable to find work within three to six months the program lasts they might be eligible for the Home Affordable Modification Program.
What are the requirements to be eligible for this program?

All lenders and mortgage lenders that are part of the HAMP program will be required to provide aid to unemployed borrowers who:
a) Meet HAMP eligibility requirements. These include that 1) the home is the borrower’s primary residence and2) the mortgage is not larger than $729,000.
b) Provide evidence they are receiving unemployment insurance benefits.
c) Request aid before the first 90 days of delinquency have elapsed.

What will happen to troubled borrowers that cannot find a job and do not qualify for a HAMP loan modification?
This is the worst case scenario. The program will require lenders to consider an alternative to foreclosing on the mortgage. These alternatives include short sales, deed-in-lieu, as detailed in the new HAFA (Housing Affordable Foreclosure Alternative Program) program.
My Mortgage is underwater, how do the changes in the program benefit me? These changes encourage lenders and servicers to write-down more of the mortgage’s principal. This will help troubled homeowners to recover some of the equity caused by the latest home price declines in many areas.

Jumbo Mortgages Now easier to get

Jumbo Mortgages Now Easier to Get
It is not surprising that with all of the turbulence in the home mortgage industry many consumers are confused and reluctant to take out a loan. Unfortunately, countless buyers and home owners are missing out on some incredible deals. They do not realize the current situation; jumbo mortgages now easier to get.
What is a jumbo mortgage? Typically, it is a loan that is in excess of the maximum amount limit that is set by Fannie Mae and Freddie Mac. These are large loans for higher end priced homes.

The crisis in the banking industry has been in the news headlines lately and people have naturally assumed that large home loans have become more difficult for buyers to be able to qualify for. However, in an effort to help the banking industry, Congress passed an economic stimulus package which included sections that would aid home borrowers. The intent was to make jumbo mortgages, those loans over the $417,000 limit set by Fannie Mae and Freddie Mac, easier and cheaper to get.
] Jumbo mortgages now easier to get. This is the trend as mortgage industry leaders are beginning to see the light at the end of the tunnel. Many are confident that positive trends are beginning to emerge. The conditions are beginning to improve to the point where it is not only making it easier to qualify for the loans but it is also responsible for the rates to drop.
Many real estate brokerage firms are seeing a sharp increase in activity in the jumbo loan market segment. Some firms are reporting as much as a 40% increase in their jumbo mortgage loans. As more activity is stimulated in the home mortgage market, credit will further loosen up which will help the higher priced home market. This is a great time to look for a home loan; jumbo mortgages now easier to get.
For those who are still skeptical, the picture becomes perfectly clear by looking at the figures. Compared with the rates from last year, jumbo loans for those who are highly qualified are presently at about a half of a percentage lower than they were twelve months ago. The required down payment amount has also dropped. Home borrows can secure a jumbo mortgage with 20% down which is less than the 30% that was required at the end of last year. If you are in the market then you are in luck; jumbo mortgages now easier to get.
The economic situation today makes it an uncertain time for home buyers. There has not been an abundance of good news lately but some indicators are now looking better. While many borrows remain nervous about taking out a home loan, there is some good news. For those consumers who are seeking a jumbo loan, whether for a new home or for a refinance, this is a good time to do it. The present home mortgage situation is this; jumbo mortgages now easier to get.

Seller Financing for Homes

Seller financing for homes is a concept that most people aren’t aware of. It can be the answer to the problem of selling in a slow market with tight credit. More buyers will be attracted to the home with seller financing, so it may sell faster.
Each state has their own real estate laws, so the process of creating a promissory note and mortgage should be handled by a real estate attorney. Since this is a legal agreement, it will be recorded in the property assessor office.

There are several different options to sell a property, with thought given to terms, interest rate, and length of note and mortgage. Selling a property this way gives more flexibility for sellers and buyers. It also has its’ advantages and disadvantages to think about.

Consider the several types of seller financing for homes. Always get a good size down payment and use the home as collateral. A straight all-inclusive mortgage for the entire balance, a land contract, a lease option, or a second mortgage are several creative financial solutions for seller financing.

A straight all inclusive mortgage and note can be good since it will get the property sold faster. It works well when little or no mortgage is on the existing home. Also a higher asking price and interest rate, can be a realized. If the thought of receiving steady monthly payments is attractive, then it is a win-win. Once a promissory note and mortgage are established and there is some seasoning, the owner may sell off the note to an investor. Seasoning means that the buyer has made steady payments for a given time. This makes it more attractive to potential investors.

The disadvantage for this type of financing is a risk that the buyer doesn’t pay, then the seller will have to foreclose and take possession.
The land contract will create an equitable title, but the deed isn’t granted to the buyer until the last payment is made. It would be best to have a short term for this type of arrangement.

The lease-option is a short term arrangement allows the buyer to have some equity as long as he makes payment. The property is leased for a given time and a pre-determined amount is applied to the down payment. It can be very flexible in terms for both parties. If the buyer doesn’t make payments, then the owner will have to evict them and start the selling process over, again.
The most risky type of financing is agreeing to the second or junior mortgage on the property. The owner agrees to hold smaller mortgage for the balance, after the buyer’s lender holds a first on the home. If the buyer defaults, then it’s difficult to get paid after the first mortgage.

Getting a down payment and using the home as collateral is essential, in any case.
Seller financing for homes can be a great option for both parties but weigh the advantages and disadvantages carefully.