Government Mortgage Assistance Programs promised to help millions of American homeowners lower their monthly mortgage payments and save their homes from foreclosure. What have been the results for 2010? Have government mortgage assistance programs met the expectations?

The Data

The July to September 2010 quarter show that around 470,000 homeowners received some kind of mortgage assistance. That represents a 17% drop from the second quarter of 2010, and a 32% drop from the same quarter of 2009. Bruce Krueger, a mortgage analyst with the Office of the Comptroller of the Currency, explains this is a natural pullback after banks have sifted through the pool of eligible borrowers who were eligible for mortgage assistance.

The main government mortgage assistance program is HAMP, the Home Affordable Modification Program. How does it compare with mortgage modifications carried outside the program?

The Office of the Comptroller of the Currency report shows that in the third quarter of 2010 59,000 HAMP modifications were completed while 175,000 were completed outside the HAMP program. Why is HAMP lagging behind the bank’s own proprietary loan modification programs? Two main reasons: one the requirements to qualify for the bank’s loan modifications are less stringent, and two, HAMP usually requires banks to lower monthly payments by a greater amount than private modification programs. Approving a HAMP loan modification is, when all is said and done, the job of the lender and banks don’t have to advertise the differences between the terms of HAMP and private modification programs.

In a Nutshell

The truth is the Home Affordable Modification Program has not met the expectations set by the government. The administration set the goal of helping 3 to 4 million homeowners (about half the American homeowners facing foreclosure), but the program is only likely to help 700,000  to 800,000. That is barely 25 percent of the homeowners it set out to assist. It is hard to portray that as a victory. Nevertheless, for the 700,000 to 800,000 who do see their monthly payments lowered and save their homes from foreclosure this has certainly been a useful exercise.

If you are facing foreclosure, struggle to afford your monthly mortgage payments or have just lost your job, there are government mortgage assistance programs you can apply for. The key is acting early. The third quarter of 2010 has seen a sharp rise of foreclosures, a total of 187,000 in the July to August period. That is a 32 percent from the second quarter and 3.7 percent from the same period last year.

Although there are no  guarantees, there are steps you can take to avoid becoming a statistic. Explore our website and see what mortgage assistance programs you can qualify for.

The Texas Mortgage Credit Program was created especially for first-time Texas homebuyers of low and moderate income to assist them to become homeowners of new or existing homes.

If you are a first-time homebuyer, that is to say that for the last 3 years you have not owned a home as your primary residence. If your income and the purchase price of the property is within the maximum allowed by the program and you are going to use the home as your primary residence then you are eligible to receive a Mortgage Credit Certificate (MCC).An MCC qualifies homebuyers to claim a dollar for dollar reduction on their federal tax liability for mortgage interest paid each year.

The size of the yearly tax credit will be 30% of the annual interest paid on the mortgage loan. The maximum amount of tax credit can not be more than $2,000.00 dollars per year. For example a person with a $121,000.00 mortgage and a 6.0% interest rate would normally pay $7,260.00 interest for the first year. But with the 30% reduction rate of the MCC which comes to $2,178.00 the buyer would get a $2000 (the maximum) mortgage credit which means that instead of paying $7,260.00 interest he or she would pay $5,260.00 A saving of $2,000.00 every year.

This will last as long as the mortgage is outstanding and the borrower uses the home as the primary residence. The homebuyer must adjust the W-4 form with their employer and file the IRS form 8396 when they do their income tax return. The forms are available on the IRS website. It must be noted however that the MCC does not apply to the refinancing of an existing loan with the exception of the Qualified
Subprime loan originally financed through an Adjustable Rate Mortgage (a mortgage loan that stipulates the interest rate will be adjusted at a future date, usually 1,3 or 5 years)and that was financed after 2001 and before 2008 and the borrower must meet the Federal Housing Administration Hope for Homeowners Guidelines. The Texas Mortgage Credit Program has higher income and purchase price limits in certain cases and the first time homeowner requirement can be waived too if for example the new property is located in a targeted area.

A targeted area is an area of chronic economic distress. To check whether or not your new residence falls in a targeted area you can look at the list of targeted areas on the website by county under Targeted Areas Census Tracts. Disaster areas benefit from these exceptions too. In any case, prior to the purchase buyers are required to complete the homebuyers education course by certified providers. Lists of providers are available on the website also.

The State of Texas hopes that this program will help many citizens of Texas become homeowners, in this
way strengthening the community.

The quick answer is that loan modifications should not cost you anything. At the very least, there should be no out-of-pocket cost when processing a loan modification. The truth, of course, is a little more complicated. This article will look into the real cost of a loan modification and how to avoid paying more than you need to.

Processing a loan modification should be free. If it isn’t, get suspicious.

There are experts and experts.

Unfortunately, since the real estate downturn that began in late 2007, some realtors, real estate lawyers and “consultants” have rebranded themselves as loan modification experts. These experts make money out of helping homeowners to refinance or modify their mortgages, often charging huge fees for their services.

The sad thing is that homeowners, who are already struggling to make ends meet, do not need to pay for help to process their loan modification. The government has created a program to fund certified housing counselors so you can access the best advice for free. Click here to find a housing counselor near you. These certified housing experts are paid to protect your interests and help you get the best deal you can in your situation.

Never pay for advice you can get free. If you do choose to pay for it, never pay upfront for services you have not yet received. This is not only a crazy way to do business, but it is also illegal to charge for financial services that have not yet been provided.

Loan Modifications may be free, but they can get expensive.

This is an important point to make. Your lender might modify your loan and reduce your monthly payments for free, but only in the sense you do not have to pay a processing or closing fee. The reality is that loan modifications can be very expensive. The reason for this is that loan modifications focus on making the mortgage affordable to homeowners struggling to pay their mortgage. The priority is to lower the monthly payments. This is done by lowering interest rates, extending the term of the mortgage and sometimes by reducing the balance of the mortgage. If your lender extends your mortgage by, for instance, 10 years, you will have to pay interest on the balance of your mortgage for 10 years more. This will increase the cost of your mortgage significantly. The length of your mortgage is actually the most relevant factor, together with your interest rate, that determines the ultimate cost of your mortgage.

Beware of loan modifications that simply lengthen your mortgage and do not reduce your interest rate or balance.

To provide financial assistance to families most affected by the downturn in the housing market the state of Indiana received $83 million in August 2010 and $139 million in September 2010.These funds were supplied by The U.S. Department of the Treasury through the Housing Finance Agency Fund. These funds will be used to help unemployed homeowners who have fallen behind on their mortgage loans, avoid foreclosure. Over the past few months Indiana also received a further $221 million to help the unemployed pay their mortgage and avoid foreclosure.

Foreclosure is the legal process your lender must follow to end your ownership rights to your home. A mortgage is considered to be default if for three months payments have not been made. There are many reasons why homeowners fall behind on their mortgage loan, most of them are because of financial hardships more often than not due to situations beyond their control.

For example job loss when expenses exceed income, the death of a spouse, medical expenses, injury, illness or divorce. What can you do to avoid foreclosure? The state of Indiana provides financial counselors who will speak to you about budgeting, helping you to take control of your financial situation by helping you to understand your income and expenses.

Your anxiety will be much less when you see where you money comes from and where you are spending it. Making a budget is essential to understanding your financial situation. The counselor will help you plan to meet your expenses and to start to build assets helping you to determine options to avoid foreclosure. You can call 1-877-Get-Hope and you will be put in contact with a certified foreclosure prevention counselor to discuss your specific need. This is a free service offered by the Indiana Foreclosure Prevention Network. The counselor will help you find the best solution for your particular situation.

You may qualify for aid through the program that the Indiana Housing and Community Development Authority(IHCDA) will administer at the beginning of 2011 using the funds that the U.S. Treasury provided. The IHCDA has worked along with Lieutenant Governor Becky Skillman,The Indiana Foreclosure Prevention Network and The Indiana Department of Workforce Development to set up this program that is designed to assist 6,000 homeowners who are facing financial difficulties and who did not qualify for present loan modification and foreclosure prevention programs.

Please do not procrastinate. Getting help and getting help early is very important. The sooner homeowners seek help and realize they are at risk of foreclosure the easier it will be to help them and the more options they will have to avoid foreclosure to the benefit of themselves and the community.

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.