The new settlement will help reduce the mortgage payments of homeowners.

The $25 Billion mortgage settlement recently announced and filed in federal court in Washington D.C. is intended to help to relieve those in difficulties with their mortgages.

The government is expected to monitor closely the banks involved to make sure that the money does in fact reach those borrowers for whom it is intended. The five banks; Bank of America, Citigroup, JP Morgan Chase, Wells Fargo, and Ally Financial are to provide the money which is expected to be instrumental in making readjustments to help about a million house purchasers who are at the moment struggling financially due to the present situation with their mortgages.

Banks were accused of misleading borrowers who were seeking modifications on their loans as well as of pursuing faulty foreclosures. They have not admitted to having done these things but have agreed to the settlement arranged by the government in order to “remediate” harms allegedly resulting from the alleged unlawful conduct.

It is likely that in a hearing in which the settlement is to be approved by a judge, the Association of Mortgage Investors will request that the court limit the modifications for investor owned loans. This group feel that those who invested in mortgage-backed securities were not included in the settlement talks but might find that mortgage modifications have financially damaging results for them. The five banks according to the settlement, over a period 3 years, will reduce the amount of mortgage debts and restructure loans in difficulties. Designed to be of some help to about 1 million property owners who are struggling, this settlement has been seen as historical and is being enthusiastically promoted by the Obama administration.

Also Federal and State governments will be receiving $5 billion of which $1.5 billion is to be used for those whose homes were lost due to foreclosure affording payments of $2,000. Officials of the Obama administration are optimistic about the measure and feel that it could be the start of the housing recovery that everyone is hoping for. An independent monitor will make sure that the new standards for processing mortgage payments are complied with. There will be a sampling process that is described as “very specific”, as well as test questions and error thresholds, the results of which will be reported on publicly. This will mean strong penalties if they don´t follow the directions on how the banks should behave.

Although the details of the investigations into banking misdemeanors have not been revealed the settlement was filed as one lawsuit and five consent judgments with the banks. There is encouragement for most of the mortgage assistance to be implemented rapidly with a limit of 3.5 years. Relief will be provided to borrowers by cutting the debt. It is expected that banks bring the mortgage payments to 31% of income and with the value of the new loan not exceeding 120% the value of the property.

The settlement documents also show that banks are to pay for the alleged defrauding of the government by lenders who sought federal mortgage insurance on risky loans. There were successful negotiations by Ally Financial and the Justice Department reducing the amount they have to pay to $110 million on the understanding that they give good terms when dealing with struggling borrowers in its portfolio. So hopefully the government will continue to strictly oversee the $25 Billion mortgage pact.

Govermnent Promises Tough Oversight on $25 Billion mortgage Pact. is a post from: Government Mortgage Help

Are you among the 62% of Americans who are unaware of the Government Mortgage Relief Programs (HAMP and HARP)? Learn how these programs can help you with your mortgage difficulties?

Those homeowners who are labeled as “underwater”, or as owing more than the value of their home, now account for over one fifth of all mortgage owners. This is not a comfortable position in which to find yourself and most people in this situation feel that there isn´t much they can do about it and they pay the higher mortgage rate or foreclose. However there are other ways of dealing with devalued property such as the government lending programs.

There are two called HAMP (Home Affordability Modification Program) and HARP (Home Affordable Refinance Program) which are specifically designed to help people to make use of lower interest rates when they are “underwater” and in this way avoid foreclosure. The terms of the mortgage are renegotiated and the interest rates refinanced at a lower rate so that the mortgage payments can be adjusted in line with present mortgage values.

The credit rating of anyone who takes advantage of the program will appear on the credit report as “current on payments” (at the newly adjusted amount). Credit information can be monitored from the three national credit bureaus which are Equifax, Trans Union and Experian. This is important because good credit rating can mean better rates and terms when dealing with lenders. To access HARP borrowers must have loans held by Fannie Mae and Freddy Mac (which are now under federal conservatorship). Loans have to have been sold before April 1 2009. In the case of a 30 year fixed rate mortgage or a 15 year loan there is now no limit as to the amount owing in relation to the value of the property.

There is a ceiling for other mortgages, and the loan-to-value ratio for fixed rate loans of more than 30 years is a maximum of 105%. This applies to adjustable rate mortgages with terms longer than 30 years as well as adjustable rate mortgages with fixed-rates for 5 years or over. Additionally you cannot be considered if your payments have been late during recent months. It is still possible to catch up and qualify though because this program will carry on until December 31 2013. An eligible borrower has to benefit from lower payments or a more “stable” loan like changing to a fixed rate from an adjustable rate mortgage. If your payment rises above 20% then you have to re-qualify by having a credit score of no less than 620 as well as not having a debt-to-income ratio of more than 45%. Lenders must verify your assets and income. Borrowers who have been declared bankrupt or whose credit ratings have been lowered due to a foreclosure do not have a waiting period as was previously the case. Another requirement that has been waived is that of lender representations and warrants for the new loan as well as the loan that is being refinanced. The fees charged by lenders called “loan level price adjustments”-a.k.a. “risk-based fees” are much lower now so that mortgage rates will also be lower. This HARP plan is new and could help many “underwater” mortgage holders. The HARP Eligibility Calculator, (visit the Zillow calculator) could help you to know if you are eligible!

Why not look into these programs in more detail and. At the very least you will lower the percentage of Americans that are unaware of them.

HAMP And HARP Offer Underwater Homeowners A Second Chance is a post from: Government Mortgage Help

Earlier this year Warren Buffet surprised America by asking the IRS to increase his taxes. Now David H. Stevens chief executive officer of the Mortgage Bankers Association is doing what amounts to the same thing by asking the government to look into new mortgage help options such as mortgage forgiveness.

However, don’t think philanthropy is the reason for suggesting mortgage forgiveness as a solution to high mortgage delinquency. Stevens simply understands what works and what doesn’t when it comes to coaching homeowners out of delinquency and back to a culture of regular payments, which is, after all, what mortgage bankers want.

According to Stevens, mortgage help options such as principal reductions–another term for mortgage forgiveness or reducing the balance of a mortgage–and lowering interest rates place cash flow into homeowners hands by reducing monthly payments, which incentives borrowers to honor their mortgages.

It is interesting that Stevens, the CEO of the mortgage bankers association, believes these measures would help the mortgage industry. It was only last week that Obama unveiled his administration’s plans to assist the housing market by reducing the mortgage insurance premiums for borrowers who refinance their mortgages and encouraging lenders to reduce the mortgage balance of underwater homeowners. The reaction of Edward DeMarco, overseer of Freddie Mac and Fannie Mae, was that these measures would cause unsustainable losses for the mortgage lenders.

In a letter DeMarco sent to Elijah Cummings, a Maryland Democrat, forgiving the debt on Freddie Mac loans would cost the taxpayer $100 billion.

The FHA does not seem to share DeMarco’s apprehension Recently the FHA reduced its upfront premiums for borrowers from 1 percent to 0.01 percent of the loan balance. This will reduce the payments of the average borrower by $$1,000 a year. According to FHA estimates, this would benefit up to 3 million borrowers.

Government support goes further than reducing interest rates or mortgage balance sheets. Obama’s relief plan also deals with veterans under the Service Members Civil Relief Act which protects the interests of veterans who have suffered from a foreclosure wrongfully. The act provides borrowers whose foreclosure has been mishandled with a minimum compensation of $116,000.

Government Should Offer Mortgage Forgiveness To Help U.S. Homeowners is a post from: Government Mortgage Help

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

You probably have never heard his name, but if you are having trouble paying your mortgage maybe it is time you learn more about this little known bureaucrat who is creating huge ripples in the mortgage industry.

We are talking about Edward J. DeMarco, the regulator of Fannie Maeand Freddie Mac. He may not appear on the nine o’clock news but DeMarco is one of the most, if not the most, influential individual in the refinance and loan modification industry Why? Simple. Fannie Mae and Freddie Mac own or insure 60 percent of all American mortgages. This means Fannie Mae and Freddie Mac have the power to grant or encourage the approval for six out of every ten refinance applications. In fact, this is an understatement. Due to their influence in the housing market and their effect on the insurance rates of mortgages, Fannie and Freddie influence the policies that all mortgage providers follow when determining the eligibility of homeowners for mortgage refinances.

But who is Edward J. DeMarco and where does he stand on the issue of mortgage refinance?

Depending on who you ask DeMarco is babbling idiot or a hero Rep. Zoe Lofgren, D-Calif. is quoted as saying: Here’s some random idiot who ends up in charge of this agency, who is doing actual damage to the housing industry and its constitutents. On the other hand, Jaret Seiberg, a senior analyst for Guggenheim Partners believes he’s the bravest guy in D.C. agree with him or disagree with him, you’ve got to respect him.

Why the extreme views? The main reason is the issue of mortgage write-downs. For a long time the Obama administration has been doing its best to push DeMarco toward pressuring banks and other lenders to reduce the balance owed on mortgages as a way of helping underwater homeowners. According to certain economists a reduction in mortgage balances is the best way to stem the tide of foreclosures.

Republicans don’t agree with that view and feel the additional risk to taxpayers would be unwarranted. In fact, for many conservative analysts DeMarco is not doing enough to protect taxpayers and should close down Fannie Mae and Freddie Mac.

Democrats tend to feel DeMarco is favoring big business and not pushing lenders toward more generous and efficient mortgage refinance terms, especially in the case of underwater mortgages. Learn in our next post how the forgiving of portions of underwater mortgages helps both owners and lenders.

New Kid on the Block Creates Ripples in the Government Mortgage Help Scene 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

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