by Andrew Latham

If you are one of the 11.3 million (and counting) homeowners who are underwater on their homes, you are probably not taking advantage of today’s low-interest rates. If on top of that you are behind in your payments or your credit history is poor, the likelihood of a lender approving your refinance application is negligible. That does not mean you cannot lower your mortgage payments and enjoy current interest rates. Welcome to HAMP, the federal mortgage aid program for underwater and struggling homeowners that doesn’t care what the market value of your home is.
HAMP, the Home Affordable Modification Program, is the Obama Administration’s response to the housing crisis. It is designed to offer struggling homeowners who are struggling to pay their mortgage, or are already behind on their payments, a chance to reduce their monthly payments by offering lenders financial incentives for approving loan modifications.
Although only your mortgage servicer or lender can approve your application, HAMP has some minimum requirements you must meet before you can even apply for a loan modification.

Requirements
To qualify for a HAMP loan modification on your underwater mortgage you must:
- Be the owner of a one- to four-unit home.
- The unpaid balance on your home must be equal or lower to following mortgage limits:
One Unit= $729,750
Two Units= $934,200
Three Units= $1,129,250
Four Units = $1,403,400
- Have signed your mortgage agreement before January 1, 2009.
- Your mortgage payments and associated housing costs must be more than 31 percent of your pre-tax income.
- You must be able to prove you are going through a financial hardship, and you can no longer afford your mortgage.

Misconceptions

Unfortunately, many counselors and even lender have provided bad advice to underwater homeowners hoping to join the government’s HAMP program. For instance, some lenders have advised their customers to stop making payments on their mortgage so they can qualify for a loan modification under the HAMP program. This is bad advice. Not paying your mortgage will simply put you deeper in debt. You can qualify for a HAMP modification even if you are not behind in your mortgage payments. As long as you can prove you are likely to default on the mortgage soon due to financial hardship, you can apply for a loan modification.

Our advice is to talk to your servicer as soon as possible and talk to a certified housing counselor before you make any important decisions on your mortgage. Call 1-888-995-HOPE (4673) to find a housing counselor approved by the Department of Housing near you, and ask how you can apply for a loan modification with HAMP.

Fannie Mae Lease Home Program

Homeowners in danger of losing their homes through foreclosure may be able to keep them by leasing them temporarily under Fannie Mae’s new program, Deed for Lease, and becoming tenants in their houses.
Under the program, owners who qualify would temporarily sign a lease. The property would temporarily revert back to the lender, and the person in danger of foreclosure could still live in the house as a tenant. According to Fannie Mae, thousands of people who might otherwise lose their homes could be helped and could live in their homes at least another 12 months.

According to Jay Ray, Vice President of Fannie Mae, the program will help those who could not be helped by Fannie Mae’s other programs, those who "are facing foreclosure." He said he believes the new program will help "some of the uncertainty of foreclosure." He also said it will help stabilize neighborhoods because families will be able to stay in their homes "during a transitional period."
Fannie Mae is not specifically a lender and does not lend money to individuals. Instead, it works with brokers, bankers, and other mortgage partners to make certain they have adequate funds to lend to consumers.

In September of 2009 about 4.45 percent of Fannie Mae’s borrowers were seriously delinquent. According to Fannie Mae, statistics are not yet available as to how much the Deed for Lease program will cost or how many homeowners will be eligible to participate.
Although homebuyers would have to give up the deed to their houses, they would be able to rent their houses at market rate for at least year. According to Fannie Mae, some leases might be renewable after that on a month-to-month basis.

Those eligible for the Deed for Lease program include those who live in their homes as their primary residence. They also must be released from any subordinate liens on the property. In addition to those owning or purchasing the homes, their tenants may also be eligible for leases. Those interested in the program must show that the new market rental rate is no more than 31 % of their total income.
Fannie Mae answers questions about the Deed for Lease program on its website. The topics include subleasing (which is not allowed), whether someone who is at first interested in the new program may change their minds (it depends on the circumstances), and what one can do about pets.

According to Fannie Mae, certain pets pose a "liability threat" to both landlord and tenant. Those who own pets must, for that reason, have renter’s insurance. The insurance must include liability insurance for pets. Fannie Mae must be named as an additional insured in the policy.

Fannie Mae and Freddie Mac are offering financing incentives for buyers of foreclosed homes that Fannie and Freddie own.

The economy is starting to turn around a little bit, and much of the credit for that can be given to the housing market. The government has stepped in to an extent to provide help for people and their failing mortgages, and this has created a much more stable real estate market at current standing. These days, the government is looking to do more to help stimulate the housing market and provide incentives for people who want to purchase foreclosed homes. It was announced this week that Fannie Mae and Freddie Mac were providing these benefits to buyers who wanted to close on foreclosed homes that were owned by the two agencies.

The biggest issue for home buyers in today’s market is that the costs of buying a home are usually much more than advertised. Between all of the mortgage brokers, the actual cost of the home, and everything that goes along with financing a new home, things can really add up if you aren’t careful. These are things that prospective home buyers have to budget for and in some cases it can lead to them not being able to afford a certain home. What Freddie Mac and Fannie Mae are interested in doing is cutting down the price of one of the most expensive "little" fees associated with home buying.

The concentration is on cutting down closing costs. These are the sometimes substantial costs associated with closing on a home, and it comes after all of the other financing and fees have been processed. Freddie Mac is currently running what is known as the "SmartBuy" program, and it’s designed to directly pass along some savings to people who will buy foreclosed homes from the two government-controlled companies. This has been very necessary, seeing as Freddie Mac and Fannie Mae have had to foreclose on thousands of homes over the last few years. Getting these homes back on the market and sold to good buyers has been a challenge, and this is intended to help that process along.

The Freddie Mac SmartBuy program is pretty simple, and it’s certainly worth it for buyers who are interested in foreclosed property. It provides an offer of as much as 3.5% of a foreclosed home’s eventual selling price as a bonus back to sellers in order to cover their closing costs. The actual amount that buyers will receive back depends upon the home they are buying and how much their closing costs end up being, but the fact remains that this can be a substantial boost to people who might be cutting it a little bit close with their new mortgage.

This program has been running since June, and there is not a whole lot of time left for buyers to take advantage of the government help. Buyers who are interested in taking advantage of this offer have to apply through the HomeSteps program and they have to do so by October 30th in order to qualify. These are specially chosen homes by the lender and they provide two year warranties on a host of things.

One of the challenges facing potential buyers right now is that there are very few homes available in prime areas that apply for this offer. Freddie Mac is known for not accepting high mortgages – those above $400,000 – so it follows that places like New York City would not feature many of these homes. As it looks right now, this is a good fit for those people who are looking for homes in more rural areas. With the amount of money that they can save on their closing costs, it might be well worth it to consider a home in a less than prime territory.

Fannie Mae has their own variation of the program, and their homes have to be selected through the HomePath program. While the Freddie Mac version of helping buyers is quite ambitious in its own right, many are saying that Fannie Mae’s program might be an even better one. They are current providing loans on these homes for any buyer who can make a qualifying 3% down payment. In addition, they are not requiring these people to get private mortgage insurance (P.M.I.), which can be a significant cost. Likewise, they will provide some help to buyers with their closing costs.

Fannie Mae’s assistance to potential home buyers also includes a program that offers up to a 15% discount on foreclosed homes for those who live in areas that have been hammered by the economic downturn. They have also been working with companies that focus their efforts of rehabilitating foreclosed properties in order to provide more families with excellent housing options.