There are few anxieties that hit harder than the possibility of losing your home. If you have a family and children, multiply that by a hundred. Tens of thousands of homeowners and families are going through that ordeal right now in Rhode Island. However, if you are one of the million plus residents in Rhode Island you can be grateful to live in a state with one the best mortgage aid programs in the U.S.

This series of articles will look into the mortgage aid programs available in Rhode Island and what steps you should take to make the most of them and save your home from foreclosure.  It will also look at educational campaigns like “Don’t borrow trouble” and “Fair Housing Rhode Island” sponsored by the state government.

However, the first piece of advice, whether you live in Rhode Island or Texas is to act quickly. At the end of these articles we provide links to the programs and agencies that can help you. If you are struggling to pay your mortgage contact them quickly. More importantly, contact your lender as soon as possible and ask for help. Help is available for many borrowers find out if you are one of them.

Rhode Island Housing

Rhode Island Housing is a self-sustaining public agency which works with its own income. This means that no tax dollars are used to provide the mortgage aid programs they offer. Income is generated by selling tax-free bonds. Rhode Island Housing is a shining example of what can be done with a little vision and creativity to provide practical help without asking for charity or charging extra taxes. It works similarly to the California Housing and Finance Administration, although unlike the Californian agency it does not only focus on first time buyers and rentals.

Rhode Island Housing has served the residents of Rhode Island for more than 30 years. They provide low interest mortgages, grants, counseling and education to people who want to buy a home, rent one or modify an existing loan. According to the agency more than 60,000 families have bought a home thanks to their programs. They have also financed the building of over 14,000 to rent to low and medium income Rhode Islanders. The beauty of this agency is that it doesn’t only sell mortgages, and modify loans it also invests in the homes of borrowers to make them safer and healthier to live in. In the last thirty years they have invested over three billion dollars in renovating the homes.

What I like about this housing agency is that besides not using tax dollars to work it is a good business. It has won thirteen national housing awards and has earned the Standard & Poor’s “Top Tier” investment. It is not a charity in the traditional sense but a profitable company that reinvests all its profits and net worth in helping low income Rhode Islanders.

But enough of the marketing spiel let’s get into what programs you can apply for.

Myths, especially in financial matters, are dangerous. For instance, the myth that the value of homes can only go up; that there is no investment as safe as bricks and mortar was one of the catalysts of the housing crisis of 2008. Unfortunately there are still myths around that are affecting the decisions homeowners make.

Myth 3.  This is only happening to me, foreclosure is a rare problem.

This is a especially easy myth to debunk. According to the U.S. Treasury department over seven million homeowners are at risk of foreclosure. That represents a huge chunk of the total homeowners in the U.S. Factors like a drop in home prices, high levels of unemployment and rise in mortgage payments have created a “perfect storm” that is affecting homeowners of all walks of life. You are certainly not alone. However the steps you make, especially early on, will determine if you become a statistic or you save your home.

Myth 4. I’m receiving all kinds of offers of help from loan modification and housing counseling agencies. Can they all be scams?

Dishonest housing counselors are a problem in the U.S. After the housing crisis began hundreds of self proclaimed loan modification agents and housing counselors appeared out of nowhere. However, it would be unfair to say all of housing counselors are scams. Some are experienced agents that can provide valuable help. The key with housing counselors and loan modifications is to go for the free ones. This is a counterintuitive decision. We are used to thinking that you have to pay for quality; that the best professionals cost money. In housing counseling and loan modifications this is not true. The government has sponsored approved agencies all over the country so that you can receive quality advice for free or for an inexpensive fee.

Having said that if you decide to pay for advice on avoiding foreclosure and your agent asks you to:

a) Buy your home and then rent it back to you.

b) Pay fees upfront.

c) Sign things you don’t understand.

Then run. These are telltale signs of scam artists out to make a quick buck on desperate homeowners.

Myth 5. I’m too many months behind in my payments; there is no hope.

Although it is true you aren’t doing yourself any favors by delaying getting help. There is always time to try and save your home. Housing counselors and loan modification agents cannot work miracles but they certainly try. Sometimes a change in your budget or a mortgage workout with your lender can provide the break you need to rearrange your finances. Even if you cannot save your home you  can find alternatives to a foreclosure that dampen the negative effects to your credit of a foreclosure. Housing counselors can also help you take advantage of rental programs if you do end up losing your home.

Times are not easy for Michigan homeowners, as in the rest of the U.S. thousands of homeowners are facing the possibility of losing their homes to a foreclosure. From January to May 2010 alone, there have been 74,475 foreclosure filings and 9,703 foreclosure sales in Michigan. However, there is hope for those that are willing to fight for their home. Even when a homeowner simply cannot afford their home; there are alternatives to foreclosure if you take advantage of federal and state mortgage help programs.

Michigan foreclosure law has changes in the last two years to adapt to the rise in foreclosures. For instance, since July 5, 2009, state law requires lenders to work with you (and all other troubled borrowers) to avoid a foreclosure. There are also specialized government and non-governmental mortgage aid programs that focus on providing help to Michigan troubled homeowners. These include the Department of Housing and Urban Development section for Michigan, the Michigan Foreclosure Prevention Project, the Michigan Attorney General Office and the Foreclosure Intervention and Neighborhood Stabilization Collaborative.

All of these organizations agree that when your lender starts foreclosure proceedings you must immediately contact a free housing counselor or an attorney. In some cases you might even want both.

A housing counselor will help you understand the foreclosure process in Michigan and provide you with a list of mortgage workouts available to you. They will also help you communicate with your lender and collect all the information you need to negotiate a mortgage workout with your lender. The good news is that housing counselors are free. Contact counselors federally approved by the Housing and Urban Development by calling  800-569-4287 or visit www.HUD.gov. Or visit a state approved counselor by calling 866-946-7492 or visiting www.michigan.gov/mshda.  You can also contact the Michigan Foreclosure Prevention Project (http://miforeclosure.mplp.org), an organization that combines the services of legal aid offices and housing counselors throughout Michigan, as well s the Legal Services of South Central Michigan (LSSCM) and the University of Michigan Law School.

A foreclosure starts a legal process which will end in you losing your home if you don’t take steps to avoid this from happening. Foreclosure and bankruptcy attorneys have experience in dealing with debt problems, and can help you negotiate with lenders. If you cannot afford a lawyer you can find legal aid at www.michbar.org/public_resources/legalaid.cfm. They can provide you with a list of lawyers that do pro bono work (free or for reduced fees) for low income borrowers.

Contacting government and state approved agencies will protect you from so-called foreclosure prevention specialists which are often scam artists that prey on vulnerable borrowers. Remember there is no need to pay for a housing counselor, help is available for free.

Finding a housing counselor and an attorney is only the beginning, to avoid foreclosure you are going to have to contact your lender and negotiate a mortgage workout. Our next article Avoid Foreclosure Michigan: Contact Your Lender and Negotiate will look into further steps Michigan homeowners must take to protect their homes.

The housing crisis that is hitting the U.S. is affecting everybody at some level. Seven million out of 11.3 million are at risk of foreclosing on their home, 24% own underwater mortgages and many have lost their homes. However, elderly people are one of the worst hit demographics as there is little many can do to find alternatives when they or the home that cares for them forecloses.

Reports are showing a trend for evictions in senior care homes. Often the residents, the family or the staff that run the home know anything about the eviction until the police are at the door. This puts law enforcement agents in the impossible situation of having to evict residents that cannot care for themselves. Obviously, elderly care organizations and relatives are called and emergency arrangements are made.

Unfortunately, the law does not force homeowners of elderly care homes to inform their clients when they are behind in their mortgage payments and are at risk of losing the home. Of course, the owners are going through their own hell, with the risk of losing their property and their business in one swift blow.

There are alternatives for homeowners of elderly care centers just as for any other homeowner. Although not everybody can qualify for mortgage aid programs it is a route worth trying. Digging our collective heads in the sand hoping for a miracle is not an option. It is much easier to apply for government mortgage aid if the mortgaged home is also your primary address. However, there are mortgage workouts that do not require the owner to be living in the home. Even if there is no way you can afford your mortgage payments, there are more graceful ways to close your business than simply wait for the Sheriff to knock on the door.

The Home Affordable Foreclosure Alternatives provides homeowners with several ways to wind up their mortgages in more efficient ways than a foreclosure. These measures include short sales and deed-in-lieu of mortgage. The program will also help you find alternative housing you can afford. Whatever the case owners of elderly care homes should inform their clients of the possibility of eviction, and laws to that effect are being drafted.

Underwater mortgages, loans where the debt exceeds the market price of the homes, are in for some difficult times according to First American CoreLogic, a real estate consulting firm. According to their forecasts underwater mortgages will not regain equity until at least 2017. Unlike Pharaoh’s dream the seven bad years are to come before the good ones. Or did we already get those during the housing market boom years. This forecast was design for the New York City area, but its results could reflect the trend of other regions.

This is not good news for mortgage holders who were already planning a strategic default on their loans. Strategic defaulters are borrowers that can afford their mortgage, but decide to stop paying and let their home go because they feel it will be underwater for the foreseeable future and paying for it is throwing good money after bad.

Of course the forecast described above is just that an educated guest. The report based the forecast on historical data and the average rate of appreciation of the last 30 years. The problem with using historical  data, especially during crisis years, is that it is not always useful. The president of the New York Association of Mortgage Brokers, Robert Duquette, thinks that this forecast is pessimistic. He makes the point that the economy is already showing signs of recovery and that it is pessimistic to think it will take seven years. Although, he would say that wouldn’t he? It is like asking a Casino manager how likely it is for clients to hit the jackpot. You know he isn’t going to underestimate your chances.

What we do know for sure is that underwater homes are a problem in New York and the rest of the U.S. According to the same First American report, around 116,000 of the 1.1 million mortgage holders in the New York City region owe more than their homes are worth. This is below the national average. The percentage of underwater homes is estimated around 24% of the 11.3 million mortgages in the U.S.

Another factor that might hurt areas like New York, California and Florida, with high housing prices, is the mortgage rate for jumbo loans. Government mortgage programs help keep interest rates down for borrowers of loans under $729,750. In recent years jumbo loans, loans over $729,750, have still enjoyed low interest rates. If this changes, states with high house prices might suffer, and take longer to recover.

So what is the best advice for the owners of underwater homes? First do not make knee-jerk decisions. First think of the value of your home to you. Prices rise and drop but if you and your home enjoy living in your home and you can afford the payments then it has a value that debt-to-value rates cannot measure. However, in some extreme cases it is true there is little sense, at least from an investment perspective, to continue paying for a home. Banks know this which is why they are starting to offer incentives to certain homeowners which they consider are at risk of strategic default. These programs offer homeowners cash incentives if they pay their mortgage or find alternative financing without foreclosing.

These programs are still new and banks are keeping their cards close to their chest, which is understandable. They do not want a queue of homeowners at their doors asking for handouts. We will provide details of these programs as soon as we have more information. Whatever your situation it is worth contacting a reputable housing counselor and asking for advice before making any drastic decisions.

If you are a resident in Georgia and are struggling to meet your mortgage payments you are at risk of losing your home. The Georgia Department of Community Affairs provides valuable advice on how to avoid foreclosure and find free help from professional housing counselors.

Every state has different laws on foreclosure process, so it is important to know your state laws. Local housing counselors can provide you with this and other important information. Georgia, for instance, is a nonjudicial state in foreclosure matters. This means that a lender does not have to go to court to start a foreclosure. Nevertheless the borrower must be at least 90 days (three months) behind on his payments. Also, the lender or a representative must advertise the date of the foreclosure for 30 days in a legal publication of your county.

How can housing counselors help?

Knowing what to do is not easy when you are worried you might lose your home. A certified counselor can help you ask for help in the right way to the right people. Counselors have lists of contacts for key people in the main lending companies. These are decision makers that have the authority to negotiate the terms of a mortgage workout. A counseling agency can also help you to write a financial hardship letter asking for a mortgage workout. Just writing this letter and filling legal forms can be a nightmare for some people. Free counseling agencies can help you with this at no cost to you.

Counseling agencies can also help you find out what alternatives you have in your specific circumstances. For instance, if you just lost your job you might be tempted to ignore your mortgage payments until you find a job. However, a housing counseling agency can help you ask your lender to reduce or stop payments until you have a job again. These choices might not be available if you wait too long without either contacting a housing counselor or your lender. Just remember that a housing counselor is paid to have your best interest at heart, and a bank does not.

Can counseling agencies give me funds to help me meet my late payments?

Although the government funding that pays for counseling agencies does not allow them to use these funds to provide direct financial aid, but they can put you in touch with others that can. Talk to your local housing counseling agency and ask what programs (government and private) are available to help you bring a mortgage current or pay for other expenses.

Even if you feel there is no chance of you keeping your home and foreclosure is unavoidable, you should still contact a housing counselor. They can explain to you how the Homeowner Affordability and Stability Plan can help you find alternatives to foreclosure.

Click here for a list of counseling agencies approved by the Georgia Department of Community of affairs or call 1-888-995-4673 to find your closest HUD approved agency.

Photo by woodleywonderworksWhat does it do?

This program is for homeowners that are current on their mortgage payments but are paying high interest rates and cannot refinance their mortgage with the low interest rates now available. This is often because the market value of their home has dropped and commercial lenders cannot (or will not) refinance the property for the loan’s outstanding balance. These borrowers can see their monthly payments drop significantly if they refinance their home with a lower interest rate.

HARP can also help people who are only paying interest on their loan; have a low introductory interest rate that will skyrocket in the future; or those that will have to pay a balloon payment (i.e. huge final payment.

Another advantage of refinancing your home with HARP is the option of changing the type of interest rate you pay. For example, if you are paying a variable interest rate or an adjusted rate mortgage (ARM) the cost of your mortgage payments can rise (or drop) at any moment seriously affecting your budget. A refinance could help you change to a fixed rate mortgage with a similar (sometimes lower) interest rate that will remain the same for the lifetime of the loan.

A refinance under HARP will not, however, reduce the balance of your loan; the idea is to improve the terms of the loan by providing more stable (i.e. fixed interest rate) and affordable (i.e. lower interest) mortgages.

Eligibility

To qualify for an HARP refinance:

-       The house must be your primary home and be a one- to four- unit home.

-       The mortgage must be backed or owned by Fannie Mae or Freddie Mac. These are Congress chartered corporations that provide stability to the housing market by buying, and guaranteeing mortgages in a secondary market for residential mortgages. Find out if your mortgage is guaranteed or owned by Freddie or Fannie.

-       You must be up-to-date with your mortgage payments.

-       Your mortgage’s outstanding balance cannot be more than 125% of the market value of your home.

-       You will need to prove you can afford the monthly payments.

For more information on the HARP program and to check if you qualify for a refinance click here.

The number of troubled homeowners that did not stay current on their mortgage payments nearly doubled in March 2010 (2,879 from 1,499 in February). This causes many, including the Congressional Oversight Panel to doubt the efficiency of the loan modification program.

The problem the U.S.
Photo by Jeff the Trojanhousing market is facing is huge. Around seven million borrowers are late on their payments and risk foreclosure. Although over a million borrowers have entered the Making Home Affordable (MHA) loan modification program (link to article) only 227,922 received a permanent loan modification.

This is how the program works. Homeowners apply for a loan modification with their bank through the MHA loan modification program. Eligibility depends of four main requirements. 1) The mortgaged home must be the borrower’s main home. 2) The mortgage balance must be less than $730,000. 3) The mortgage payments must be more than 31% of the borrower’s income. 4) The borrower must prove financial hardship. Loan modifications aim to reduce monthly payments by reducing interest rates, extending the term of loans and sometimes reducing the principal balance of the mortgage. Nevertheless, these modifications are not automatically permanent. The borrower must first enter a three-month trial period in which he or she cannot be late on payments. Once the trial period has been successful will the borrower enjoy a permanent loan modification.  According to Treasury these measures have saved borrowers over $3 billion in mortgage payments, and the median monthly savings are $512.

Unfortunately, this is not enough. The Congressional Oversight Panel assigned to review the program recently released a report that highlighted its results. The Panel pointed out that only some of those that entered the program will receive a five-year loan modification after their trial period and some of these default regardless.

The Treasury Department had a different view. Treasury highlighted there were 227,922 permanent loan modifications in March, a 35% increase from February and over a 100,000 awaited the final signature of the borrower. A representative from the Department of Housing and Urban Development pointed out that 2,879 failed modified loans represent less than 1% of the total number of permanent modifications. Given how deep in debt many borrowers are, this is no surprise.

Data shows that even after a loan modification sixty percent of borrows redefault on their mortgages. This percentage drops to forty percent when the loan modification reduces monthly payments by 20 percent or more.

John Courson, president of the Mortgage Bankers Association had an interesting comment on this statistic. He commented that if the program can help sixty percent of troubled borrowers, and forty percent default, it was still worth it for the sixty percent that didn’t default. The forty percent that defaulted were going to do so anyway, he argued.

The bottom line is that saving your home when you suffer a serious financial setback is not easy. Many homeowners struggle to create a sustainable budget, compile the necessary information, or have other debts to worry about. If you are struggling with your mortgage payments you should contact a Housing and Urban Development Department approved counseling agency and see what you can do to save your mortgage. The MHA loan modification program is far from perfect but it has helped hundreds of thousands of homeowners keep their homes. If you act soon you increase your chances of being part of that statistic and thousands that redefault on their modified mortgages.

Photo by epicharmusTreasury Department is taking hits from all sectors, private, academic and government, for its handling of the housing crisis. The latest report produced by the Congressional Oversight Panel said Treasury’s response continued to lag behind the pace of the crisis.

Treasury has responded in two ways.  1) By pointing out the successes they feel the Making Home Affordable Loan Modification has achieved; namely, an increase in 35% of permanent loan modifications in March. This placed the total number of permanent loan modifications to 230,000 homeowners enjoying reduced mortgage payments and fixed interest rates. 2) By announcing it is still implementing new programs which should be more aggressive with the housing crisis. The problem is that big banks like JPMorgan Chase and Wells Fargo are not buying the new deals Treasury is proposing.

A centerpiece of the new loan modification program is the plan to increase the reducing of mortgage principals as a loan modification measure. Up to now the main methods banks and lenders have used to reduce mortgage payments have been increasing the term of the loan, reducing the interest rate of the mortgage, and changing variable and ARM interest rates to fixed interest rates. Clearly, this is not producing the results hoped for, so Treasury is suggesting lenders get more aggressive and is asking lenders and servicers to reduce the mortgage balance of underwater mortgages.

What does this mean?

Reducing the principal balance of a mortgage means forgiving a chunk of the money owed to the bank. For instance, if you have a mortgage of $100,000 for a house that is only worth $80,000, your mortgage is $20,000 underwater. This is also called negative equity, owing more than the value of the home. Treasury is suggesting that lenders consider reducing the mortgage balance for troubled homeowners who own underwater mortgages. Using our previous example a lender could decide to forgive the lender $20,000, bringing the mortgage out of negative equity. The theory is this would create a win-win situation. First it would allow banks to avoid stockpiling unsellable foreclosed homes. Second it would give borrowers a strong incentive not re-default on their mortgages.

A more radical version of this program is to apply principal balance reduction to mortgages that are not delinquent, that is, not behind on their payments, but have a large negative equity. This is the proposed modification that banks and lenders have more of an issue with. The worry is that reducing the mortgage balance of borrowers would give the wrong message to borrowers, which would receive compensation for borrowing irresponsibly. It would also undermine the chances of lenders taking the risk of providing new mortgages if they know the principal balance could be cut at any moment.

New Obama Government Mortgage Help Plan to Aid Americans

The Obama government on Friday introduced wide-ranging fresh initiatives to assist stressed home owners, potentially re-financing several million of these into fresh new government-backed mortgage loans together with reduced payments.

An additional component of the program is supposed to briefly decrease the actual payments associated with borrowers who’re unemployed and also searching for work. Furthermore, the government may motivate loan providers to write decrease the value of loans held by borrowers in modification programs.

The escalation in aid comes as the government is actually under rising pressure from Congress to be able to resolve the foreclosure turmoil, which is pressuring the economic system and positioning millions of Us citizens at threat of losing their houses. However the fresh initiatives could well spur protests amongst those who have kept up their own obligations and are not struggling.

At a White House briefing, authorities stressed that absolutely no new taxpayer cash would be used for the particular programs. Instead, cash to deliver incentives for mortgage servicers to participate will be drawn from the $50 billion designated to real estate in the Troubled Asset Relief Program.

Authorities said they expected the brand new programs, combined with the government’s current plan, to aid three to four million troubled property owners within the next few years.

In its statement, the Treasury mentioned the projects had been meant to “balance the need to help responsible homeowners struggling to stay in their homes, with the recognition that we cannot and should not help everyone.”

The administration’s previous efforts to control foreclosures have mostly recently been directed at borrowers who were suffering from monetary difficulty. But the biggest new initiative, which is furthermore likely to be one of the most controversial, can involve the government, with the Federal Housing Administration, refinancing financial products for borrowers who simply owe over their homes are really worth.

About eleven million homeowners, or even a 5th of these with home loans, are in this kind of position, referred to as being upside down. A few of these borrowers refinanced their houses during the boom and also took money out, making them vulnerable when prices dropped. Others simply had the misfortune to purchase at the peak.

Many of these financial products have been bundled up together and marketed to investors. Within the new plan, the investors would need to take failures, however may possibly be confident of having a lot more ultimately compared to when the borrowers went in to foreclosure. The F.H.A. might insure the newest financial products against the risk of default. The actual customer would once again possess a rationale to make payments instead of running away from a property.

The success of the F.H.A. element depends on the willingness of investors to get involved. If investors believe that a homeowner will keep on to pay, they might choose to not take the decline.

That may create a fight among borrowers and investors.

The strategy, if successful, might put taxpayers at greater risk. In the event that several extra borrowers move straight into F.H.A. loans, a renewed economic downturn in the housing market might send that federal government organization to the red.

The F.H.A. has already broadened its mortgage-guarantee program considerably in the previous 36 months as the housing problems deepened. It now insures more than 6 million borrowers, most of which made minimum down payments and therefore are now underwater.

The agency may use $14 billion in cash from the Troubled Asset Relief Program, most of which it could dangle in front of loan companies as incentives to take part.

Another major component of the program, in accordance in order to several individuals who described it, is going to be to motivate loan companies to write down the value of financial loans for borrowers in modification programs. So far, the government’s modification endeavors have centered on lowering rates of interest.

Lenders began providing primary forgiveness this past year on financial loans they held in their own portfolios. Within the fourth quarter, however, this process abruptly reversed itself, for reasons which are cloudy. The number of modifications which integrated principal reduction fell by half.

Bank of America, the country’s greatest bank, introduced this week that it would certainly forgive principal balances over a period of years on an original 45,000 stressed financial loans. One more element of the White House’s housing system will require lenders to provide unemployed individuals a reduction in their obligations for a bare minimum of three months.

The brand new initiatives would certainly expand the government’s present mortgage loan modification program, announced last year along with great fanfare. It’s led to less than 200,thousand individuals getting long term brand new financial products. As much as 7 million individuals are generally seriously overdue on their financial loans and at risk of foreclosures.

Whilst fewer people are beginning fall behind, the number of borrowers that are seriously affected is actually increasing. Within the fourth quarter, the number of households at the very least 90 days past due on their home loans swelled by 270,thousand, according to a report written Thursday through the comptroller from the currency and the Office of Thrift Supervision.

The amount of foreclosures in the 4th quarter rose 9 percent, to 128,859. An additional 38,000 owners discarded their houses in short sales, where the lender agreed to accept less than it was owed.

The federal government isn’t planning to obtain financial products for the F.H.A. refinance program, stressing that must be voluntary.

The administration recognizes that a few individuals finances have deteriorated so much that they are over and above help, the person said. People in that situation simply cannot afford the houses they are living in, the person said, even if the mortgages were reduced.

New Government Mortgage Help Plan to Aid Americans

Newer Posts »