Underwater mortgages create a huge problem for homeowners and lenders alike. When your home is worth much less than the balance on its mortgage it takes away much of the incentive for paying your monthly payments because most of us view our home as an investment not an expense.

The government is trying to give homeowners an additional incentive to keep their homes by offering loan modifications and refinancing that improve the terms of their mortgages. There are four main ways to improve your mortgage’s terms: reducing your interest rate, changing from a variable rate to fixed rate, extending the term of your mortgage and reducing the amount you owe your lender.

Needless to say lenders are not in love with any of these options with the possible exception of extending the term of the mortgage, which reduces your mortgage payments but can increase the overall cost of your mortgage. However, the less popular mortgage rescue method for lenders is without a doubt the reduction of the mortgage balance. However, research shows that reducing the balance of a mortgage is the most effective way of reducing delinquent borrowers, which is good for both lenders and borrowers. For this reason the government is trying to get Freddie Mac and Fannie Mae to pressure lenders into reducing the mortgage balance of their underwater clients. Fannie Mae and Freddie Mac hold or insure 60 percent of all mortgages in the United States and therefore has the leverage with the large mortgage providers.

Edward J. DeMarco, the regulator of Fannie Mae and Freddie Mac, does not believe write-downs are the panacea their supporters present them as. "There’s no free lunch" he is often quoted as saying when asked why he doesn’t support he Obama administration’s efforts to incentivize mortgage write-downs.

Although DeMarco does not support write-downs he is planning to provide lenders with incentives such as increasing financial aid for those willing to improve the conditions of underwater mortgages. Learn more about these incentives in our next post.

Government Tries To Get Fannie and Freddie to Write-Down Underwater Mortgages. is a post from: Government Mortgage Help

Regardless of which loan modification program you choose to apply for, there is one document you will need to read and understand well: your mortgage statement. Unfortunately, most mortgage providers do not make an effort to make this documents particularly reader-friendly. They invariable use terms and expressions which you will probably never hear unless you are in the mortgage business. However, loan modification applications require borrowers to provide information they can only find in their mortgage statement.

This article will describe the typical sections and terms used in mortgage statements. Although there are many mortgage servicers and they all use slightly different formats in their mortgage statements, they are similar enough for a general summary to be useful regardless of which mortgage servicer you are dealing with.

Mortgage Servicer Contact Information

This is found at the top right of the statement. It includes the company’s address, name, phone number and in some cases it will even specify the loan officer who processed your loan. This information is important because this is the address you will need to send loan modification application.

Loan Number

Mortgage servicing companies have thousands of clients. It may sound harsh but for them you are just a number, whatever their adverts say. You need your loan number as a reference so your mortgage servicer can identify you and your loan modification application. This number is usually at the top right of the statement, directly below or above the mortgage servicer’s contact details.

Interest Rate

You cannot know if a mortgage modification is a good deal for you unless you know what rate you are paying now. It is surprising how many homeowners do not know what their current interest rate is, even though this rate is the main factor—together with your mortgage balance—that determines the cost of your mortgage payments. The interest rate of your mortgage will be in the Summary section of your statement.

Taxes Paid

One of the quickest ways of losing your home is to stop paying property taxes. Your mortgage statement provides you with the total amount paid toward property tax for the year and how much is left in the escrow account to cover these expenses. More on what an escrow account is below. You can usually find the total taxes paid and the balance of your escrow account in the Summary section below the interest rate and the interest paid to date totals.

Total Monthly Payment

Government mortgage aid programs focus on the affordability of a loan modification and how much better off a borrower will be after the modification. These is mostly determined by the total monthly payment you have before and after the mortgage modification. The total monthly payment includes all types of payments related to the mortgage, such as insurance, taxes and interest as well as the payment of the mortgage principal. This figure is usually the last line on the Summary section of the statement.

Escrow

Borrowers can choose to send money every month to a special account as part of their monthly payment. This account is used to pay for additional expenses related to the mortgage, such as taxes and insurance. Mortgage statements include the monthly amount sent to the escrow account as an item in the “Activity since your last statement” section, which is usually at the bottom of the page below the Summary section.

Mortgage Terms You Must Understand: Your Mortgage Statement is a post from: Government Mortgage Help

The government’s Home Affordable Modification Program is a powerful tool for homeowners who cannot afford their current mortgage payments, but can avoid foreclosure if only their mortgage provider is willing to modify their terms. The program does this by either extending the term of the loan—that is the amount of years you have to pay it—reducing the interest rate, forgiving a chunk of the loan (as you might have guessed this is not so common), by taking a portion of the loan out of the loan and postponing payment till the end of the mortgage term (also known as a balloon payment) or a combination of all the above.

However, as useful as this program is, it is not for everyone. To qualify you must be able to meet the eligibility requirements of the program, which is designed to filter out homeowners who simply cannot afford a reasonable mortgage payment and help those who do have the financial circumstances to take care of a modified loan. Of course, many people who are able to pay for reasonable priced monthly mortgage payments fall through the cracks of the program because they do not do their homework and provide their mortgage servicers with the information they need to approve their loan modification application. This is often because the homeowner does not understand what is required or the meaning of some of the technical terms used in the literature provided by the HAMP program and the lender. This series aims to bring some clarity to the more complicated terms and processes included in the Home Affordable Modification Program.

What is Your Net Present Value, or NPV?

The net present value model is an important tool in the Home Affordable Modification Program. It is an equation (see formula above) that computes the reliability of future cash investments and is used widely in business to determine the profitability of an investment. In the mortgage setting the NPV assesses the likelihood of mortgage lenders profiting from a loan modification.

Your net present value can be seen as a test which you can either pass or fail depending on if it is positive or negative. Your NPV is positive when the total discounted value of the expected cash flows for your proposed modified loan is higher than the total discounted value of expected cash flows without a loan modification. Wow, that was a mouthful. Put more simply, the NPV test determines whether modifying your loan is beneficial for the lender. If your NPV is negative it generally means your lender is better off not modifying your loan. Borrowers who score a positive NPV are viewed as a good investment to lenders because they are more likely to pay their mortgage and increase the returns on the lender’s investment with a loan modification than without.

HAMP Mortgage Terms You Must Understand: Your Net Present Value or NPV is a post from: Government Mortgage Help

The Home Affordable Modification Program provides borrowers with the chance of permanently modifying their mortgage to a monthly payment they can afford. Not only that, the program can also help borrowers change their mortgage from a high-risk variable rate loan to a stable fixed-rate loan. However, for you to qualify for a Home Affordable Modification Program you must first complete successfully the program’s Trial Period Plan.

Many borrowers get confused about the requirements of the Trial Period Plan, fail the trial and lose the chance of saving their mortgage from foreclosure. This article provides information on how to meet the Trial Period Plan requirements. The article is based on information provided by the Departments of the Treasury and Housing and Urban Development through their MakingHomeAffordable.gov website.

Step 1: Fill in the three documents in the Home Affordable Modification Program Initial Package: 1) Request for Mortgage Assistance Form, 2) Tax Form 4506T-EZ (or Form 4506-T) and 3) the Verification of Income form. These documents can be downloaded by clicking here. Print two copies of each document, one for your mortgage servicer and one for your records.

If you have trouble understanding the documents and you are not sure how to complete them, call 1-888-995-4673 and request to talk with a housing counselor. This service is free.

Step 2: Send the documents to your mortgage servicer. You can find the address of your mortgage servicer by visiting this website. This service is provided by the MakingHomeAffordable website and includes all the mortgage providers who are enrolled in the HAMP program. The list of mortgage providers is organized alphabetically and provides the name, phone, address, fax number of all participating mortgage providers.

Step 3: Check your mortgage provider has received all the forms and documents they need to confirm your eligibility for the HAMP program. Do this as soon as possible because if you are missing a form or have made a mistake in filling the forms you will need to correct the mistake or send the missing document before your trial period ends.

Step 4: Make all your mortgage payments. This is crucial. Once of the main purposes of the trial period is to check the modified loan is suitable for you. In other words, your mortgage provider and the government want to know if you can afford the new mortgage payments. If you do not pay your monthly mortgage payments regularly during the trial period, you will not be granted a permanent loan modification.

Home Affordable Modification Program: Understand the Trial Period is a post from: Government Mortgage Help

Home Equity Lines of Credit, also known as HELOCs, are a popular method to get credit among homeowners. It allows homeowners to get low-interest credit without having to pay initiation fees and other administrative fees. However, what should you do if your mortgage provider freezes your line of credit? This article provides five steps you can take.

If your HELOC has been frozen or in any way reduced then you have to be provided with a written notice within 3 business days of this happening. So your first step in dealing with your line of equity being frozen is to read the notice that you receive.

Your second step will logically be to call your lender to find out why this action was taken. Of course, if you have fallen behind on your payments, this is probably the reason. However even if your payment record is good your lender might freeze or reduce your HELOC if the value of your home has fallen.

The third step is to learn what you can do to satisfy your mortgage provider and open your line of credit again. As we mentioned above, the most likely reason for freezing your HELOC is either that the value of your property has declined or because your financial circumstances have changed. You may be helped if you have an understanding of the way your lender reasons on your particular HELOC. It could be that the lender is not yet aware of any important improvements you have made on your property and which have increased the value of your home. A lower credit score could be because of a change for the worse in your financial circumstances so you need to find out how to build up your credit.

Once you have taken the steps recommended by your lender to address your frozen HELOC, write a formal request to reinstate your line of credit. This is step four. When your lender receives this request for the reinstatement of your credit rating they are legally required to promptly investigate the case and to find out if your frozen HELOC now meets the eligibility requirements to be reinstated.

Now the fifth step can be taken. Keep an eye on fees. Although your lender is entitled to charge fees for reinstating your HELOC, there are certain restrictions. These fees cover the costs of an appraisal and credit report which they may charge when they consider your request to reinstate your HELOC. However, there is no fee to reinstate your credit line when the reason for freezing or reducing your HELOC no longer applies. Taking these five steps into consideration and following them could help you to keep good relations with your lender and help you to restore your HELOC more rapidly or even prevent your HELOC from being frozen or reduced in the first place.

Five Steps To Deal With Your Bank Freezing Your Line of Equity is a post from: Government Mortgage Help

The Obama administration has introduced a new program to help homeowners avoid foreclosure. If you are struggling to pay your mortgage and worry you may lose your home, read on. Foreclosure can be avoided using the PRA or Principal Reduction Alternative which was designed (by MHA – Making home affordable) to motivate mortgage services and investors to reduce the amount owed on a home, especially when the value of the property shrinks to the point where the home is worth less than the money owing.

You are advised to get in touch with your mortgage company at the earliest opportunity to find out whether or not you are eligible for the PRA program.

Those eligible include:

1) mortgages not owned or guaranteed by Fannie Mae or Freddie Mac,

2)  those who owe more than the actual value of the property,

3) primary residence homes mortgaged on or before January 1^st 2009.

You may also be eligible if:

1) your mortgage payment exceeds 31% of their monthly income (pre-tax);

2) you owe as much as $729,750 on your first mortgage.

Anyone accepted for the program must have enough documented income to cover the newly adjusted payment and must have no convictions for the last 10 years for larceny, theft, fraud or forgery, money laundering or tax evasion connected with a transaction for a mortgage or real estate. This list should give you a good idea of whether of not you are eligible so contact your mortgage server to make sure.

The MHA – Making Home Affordable has a program called HAMP –The Home affordable Modification Program. A large number of companies have agreed to participate in the program. Freddie Mac and Fannie Mae own loans in many mortgage companies which are required to participate too. The way to find out if your loan is held by Freddie Mac or Fannie Mae is to visit the Loan Look Up. The Homeowner´s HOPE tm hotline at 1-888-995-hope (4673) could help if you have further enquiries about the program.

Ask for “MHA Help” if you need assistance with your mortgage company or if you think that you are eligible even though you were in fact told that you are not eligible. There are over 100 servers who participate in the HAMP program and who are able to determine whether homeowners qualify for principal reduction. They have written standards of how to apply PRA.

It is always best to speak to a housing expert in order to fully understand your options. They are qualified to arrange a plan that fits your personal circumstances and they are available in more than 160 languages at 888-995-HOPE (4673). HUD (Housing and Urban Development) approved counselors do not charge you for their advice. They will help you with your budget and indicate what documentation you will need to give to the mortgage company as well as having helpful information about local resources.

Save Your Home From Foreclosure with the Government´s Mortgage Principal Reduction Alternative Program is a post from: Government Mortgage Help

When it comes to mortgage problems, the sooner you take action the better, especially when those problems are related with making your monthly payments.

If you are struggling to make your mortgage payments, your mortgage lender should be called first and put in the picture as to your financial situation. If you need more help there is a list of resources on the U.S. Department of Housing and Urban Development´s (HUD) website. Or you could call (800) 569 4287.

Make sure you are fully aware of your real situation by checking over the mortgage loan documents and be prepared to give clear information as to your expenses. However, before you call it is a good idea that you understand what options you are likely to have. These options are separated into three main groups: temporary solutions, long-term solutions and last-ditch options.

Temporary Solutions

- Reinstatement

-Forbearance

- Repayment plan

Temporary solutions include a reinstatement plan whereby a date is set for repayment of back payments. Forbearance may be offered if you have had a reduction in income or an increase in expenses. This involves a temporary -3 or 4 month reduction or suspension of mortgage payments followed by a new loan repayment plan. A repayment plan means that you may be able to pay back money owing over a period of time by adding a certain amount to regular monthly payments.

Long-Term Solutions

- Loan Modifications

- Partial Claim

The main long-term mortgage solution is a loan modification. This requires the lender to adjust the terms of the loan to fit your new situation so that you can afford to pay your monthly payments. This could mean having to pay a loan modification fee. Another long term solution might be partial claim whereby you speak to your private mortgage insurance firm who might agree to provide a one time interest free loan so as to bring your account up to date. The repayment of the loan is due when you sell the property or pay off your mortgage.

Last-Ditch Options

- Short Sale

- Assumption

- Deed in Lieu

If you cannot make use of the previously mentioned alternatives you may have to face the fact that you cannot keep your home and at this point you might need to sell the property. Your lender will most likely give you a certain amount of time to pay off the amount owing on your mortgage and they may expect you to use a real estate professional to sell your property.

If selling the property is only possible for an amount inferior to the full amount of the loan, your lender might agree to what is called a pre-foreclosure sale or short sale. Notice, you may still owe income tax on the difference between the amount you owe and the amount you actually pay.

There is another possibility available at this point called assumption where a qualified buyer might be permitted to take over the mortgage. Check with your lender if you would like to use this option.

Finally there is Deed in lieu of foreclosure by means of which the one unable to pay back the mortgage can give the property back to the lender who then does not require the balance of the loan to be paid. Tax may be payable but this option is better than foreclosure when it comes to your credit rating. This last option might not be applicable until you have tried to sell the property at fair market value for at least 90 days.

Temporary, Long-Term and Last-Ditch Options to Avoid a Foreclosure is a post from: Government Mortgage Help

If the economy has hit your family hard as it has many others in recent years, you have undoubtedly run behind on bills that in the past were a non issue. Juggling cramped funds can be at the least a headache, but more seriously can turn into a life altering problem when you are unable to keep up with the mortgage on your home.
In order to help Connecticut families along the way to financial recovery without losing the important stability of their homes, there are several programs offering some relief from the burden of a mortgage that is heading toward foreclosure. The Connecticut Housing Finance Authority (CHFA) 860-571-3500 is offering the CT Families Program which offers you the option to refinance with a 30 year fixed loan. You may still qualify in many cases even when your mortgage has become higher than the worth of your home. Your burden may further be relieved by help with closing costs on the second mortgage.
A valuable option available to those who do not qualify for the CT Families program, is the Emergency Mortgage Assistance Program (EMAP) 860-721-9501. If you have been unsuccessful in resolving your delinquency through personal contact with your mortgage holder or mortgage counselor, and you cannot find a way to financially restore your loan, you may qualify for this state provided assistance. You will be under a new, 30 year fixed rate loan. This provision is made for those undergoing credible financial hardship, who have taken the reasonable steps already listed to resolve the situation. Under Connecticut law, financial institutions are required to advise you of this resource when you are facing foreclosure.
The third step to take, if you do not qualify for the above options, would be through the Homeowner’s Equity Recovery Opportunity (HERO) Program. Under this provision, The Connecticut Housing Finance Authority would have to determine that you do not qualify for CT Families or EMAP help. They then are able to negotiate with your mortgage holder to purchase the loan for the State of Connecticut. Once the mortgage is in the State’s hands, they can create reasonable terms for repayment by you, the homeowner.
You may not have reached a state of emergency yet, but are struggling and unsure of the future. In this case, look into the The Mortgage Relief Program. This is a bank supported opportunity for homeowners who are dealing with high rate or non traditional loans. Various New England banks are participating. They can be a valuable resource, with information about both state and federal assistance programs, including Federal Housing Authority Loans and the MHA or "Obama Plan". Citizens Bank, Sovereign Bank, TD Banknorth, Webster Bank, and Bank of America are participators.  

Connecticut Government Help: Connecticut Mortgage Assistance Programs is a post from: Government Mortgage Help

The State of Vermont signed a new law which protects homeowners who are at risk of losing their mortgages. The measures were advocated by Paulette Thabault, the Commissioner of Banking, Insurance Securities and Health Care Administration and supported by the financial services industry. How do these measures help homeowners? How will it change the relationship between banks and borrowers?

Enhanced Mortgage Assistance

The new bill provides an enhanced mortgage assistance to borrowers. Although Vermont has been one of the states least affected by the mortgage crisis, the new law provides practical assistance to homeowners who are struggling to meet their mortgage payments. The program, which was included in Governor Douglas’ Economic Growth Initiative, directs homeowners to credit counseling, refinancing options and other alternatives to foreclosure.

Streamlined Licensing

One of the problems the mortgage crisis uncovered was an inconsistent licensing process and ineffective bureaucracy, which was a burden to financial institutions but failed to protect consumers. The new law has the ambitious goal of reducing the regulatory burden on lending institutions, improve the communication between regulators and reduce fraud by changing the licensing process and industry standards.

These changes include setting a minimum competency level for all mortgage loan originators, requiring all borrowers to complete a minimum of 20 hours of pre-license education, introducing special screening of mortgage loan originators, improve communication between  state regulators so fraudsters cannot hop from one state to another and bolster anti-fraud measures. Let’s add some details to those general measures.

The additional screening of loan originators will require regulators to deny the application of loan originators who have committed a felony in the last seven years, have ever committed a financial felony or have had a similar license revoked. This will increase the penalty of committing any type of financial fraud and helps protect consumers from financial consultants with a criminal or unethical work history.

The expansion of anti-fraud regulations includes a list of practices which mortgage originators cannot practice, such as misleading borrowers, collective fees which are not approved by state regulators, advertising loan terms which are not available and bribing or otherwise influencing the work of an appraiser.

If you live in Vermont and need assistance with your mortgage, call 1-888-568-4547. For more information on what to do if you are having problems with your mortgage read our next article on Vermont’s Government Mortgage Assistance.

Vermont Mortgage Assistance: Government Mortgage Help is a post from: Government Mortgage Help

South Dakota Mortgage Help

The loan assistance which the South Dakota Housing Development Authority provides is known as LAP which is The Loan Assistance Program. The idea is that down payment and closing costs when buying a home can be prohibitive. For this reason they are taken care of by the program as long as the first mortgage for the property is financed through a lender who is participating with the South Dakota Housing Development Authority (SDHDA). Because the LAP loan has a very low interest rate (5.0%) and the monthly payments are reasonable, it makes owning your home a real possibility. The maximum loan available is $5,000 over a period of five years. SDHDA provide the assistance loan on condition that your take Homebuyer Education classes with an approved center to ensure that you really understand all the steps you are required to take when buying property. The actual monthly payments you make for your LAP loan will be included in your regular mortgage repayments each month. In effect the LAP loan is a second mortgage as is EMAP which is the Employer Mortgage Assistance Program. However with EMAP the amount you may borrow is a minimum of $600 up to the maximum of $6,000 over a period of 5 years and the interest rate is 2% only. To apply for this type of loan you will need to contact a participating lender and have an eligibility certificate which you can get from your employer, who must be a participating employer. As is the case with the LAP loan the EMAP loan is repaid together with the first mortgage loan and you can have it paid automatically from your bank account to the lender each month if you wish. If you obtain an EMAP loan with the cooperation of your employer but before the end of the 5 years period you change employment and therefore no longer work for the same boss your interest rate will be changed from the 2% to the prime rate plus 5%. This arrangement is provided for in the “Addendum to the Promissory Note” which you sign when you close the loan. Your participating lender might have other important details which you will need to take into consideration when you take out the loan. With the Down payment Assistance Loan there is not a prepayment penalty to worry about. If you sell your home you are required to settle the amount of the Down Payment Assistance Loan. SDHDA will inform the person who closes the sale of the amount to be paid so that the loan can be paid off. In this way SDHDA is able to assist many people to purchase their own home. The Homebuyer Education classes are very important in helping you to know what to expect and how to go about your property purchase in the best way. Please take advantage of these provisions.

The South Dakota Housing Development Authority Offers Loan Assistance For Homebuyers is a post from: Government Mortgage Help