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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.
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