How Government Stimulus Plan Can Save Your House
Guidelines for Avoiding Foreclosure by Modifying Your Mortgage
Mar 4, 2009 Rosemary E. Bachelor
This multi-pronged program can get underway almost immediately because no Congressional approval is required. Lenders should be able to start modifying terms of eligible mortgages, according to the U. S. Treasury Department. This means affordable payments for mortgage holders now at risk.
Eligibility Guidelines
Guidelines for this $75 billion segment of the overall $275 billion housing stimulus program formulated by the Obama administration are given below.
This is a summary of the guidelines as given on the U. S. Treasury website. In practice, they are more detailed and individual circumstances may require some finetuning. In general, the following are eligible for financial assistance on home mortgages:
- Loans originated on or before January 1, 2009.
- First-lien loans on owner-occupied properties with unpaid principal balance up to $729,750. Higher limits allowed for owner-occupied properties with 2-4 units.
- All borrowers must fully document income, including signed IRS 4506-T, two most recent pay stubs, and most recent tax return, and must sign an affidavit of financial hardship.
- Property owner occupancy status must be verifiable through borrower credit report and other documentation; no investor-owned, vacant, or condemned properties qualify.
- The mortgage lender/servicer must be eligible to receive federal incentives to modify mortgages of at risk borrowers who have not yet missed payments (The mortgage servicer determines whether or not the borrower is at imminent risk of default.)
- Modifications must be made from now until December 31, 2012; loans can be modified only once under the program.
Action Items for the Borrower
There are things qualified homeowners can do to initiate the prompt modification of their existing mortgage and secure lower mortgage payments. Here are a few of them.
- Go to Treasury Department website to see if you qualify for the Home Affordable Refinance Program, the Home Affordable Modification Program, or the Hope for Homeowners program.
- Get additional details at the special Homeowner Affordability and Stability Plan website.
- Contact your lender and begin pressing for altered terms. If your lender is not cooperative, contact your Congressional representative and complain.
- Assemble your tax returns, proof of employment, proof of residence at the mortgaged property, loan papers, list of household expenses and other relevant material
- Find out if the lender has a priority list or timeline on impending foreclosures. If so, find out position on the list. If in the top 30% of the most imminent foreclosures, push for a paperwork review within ten business days.
- Make an appointment with a legitimate, non-profit credit counseling service to get a professional opinion about your overall finances. (This indicates to the lender that you are being pro-active about all areas of your finances and taking responsibility for them.)
Property Values
According to the Treasury Department, 8.3 million properties are not worth what is due on them. In some cases, this is due to over-zealous lenders who were riding a home sales high and readily gave mortgages for over-priced properties before the real estate bubble burst. Consequences were that home values were over-inflated and lenders did not always distinguish between those who could afford these homes and those who could not. Be resigned to the fact that many people will end up paying more for their home than it is worth. The government cannot make up that difference for homeowners.
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