The housing market is in serious need of stabilizing. People wages are going down, housing prices are going down and house payments are going up. These costs must be brought in line with rental payments or those facing foreclosure will and are opting to dump their houses for the lower cost of housing, i.e., renting.
There is not a lot of incentive to continue making payments on a house that is upside down on the mortgage payments. Especially if the homeowners are financially distressed.
The whole idea is if the homeowners' payments can be brought inline with the rental market they will stay in their home before opting to move into a smaller home for the same housing payment. Even if the the value of the home is less than the mortgage, given the history of real estate the home's value will eventually rebound, putting the homeowners back in a favorable equity position.
It becomes a win-win situation for both the homeowners and the lenders they can avoid mortgage foreclosure process.
However, if you have been the unfortunate victim of losing your income with no reasonable expectation of recovering it you may have no choice but to downsize your housing wants and move into something to cover your needs. Of course, this is just until you are back on your feet. A temporary thing.
HAMP modifications:
to be eligible a mortgages have closed before January 1, 2009
modifications end December 31, 2012
only owner-occupied homes qualify
no vacant or condemned properties
upside down loans are not exempt
financial incentives given to lenders to modify loans that are NOT in default if the borrower can prove imminent hardship
homeowners can get bonus eligibility for annual principal reductions of $1,000 for up to 5 years mortgage payments have been made on-time
borrowers must sign an affidavit of financial hardship & a 4506-T
Lenders will follow steps to reduce monthly payments to no more than 31% of verified gross monthly income. Second mortgage & lines of credit are not included in this calculation
HUD-certified consumer debt counseling program will be required of homeowners with total debt payments over 55% of their income
Hope Hotline at 888-995-HOPE (4673), website http://www.hud.gov/offices/hsg/sfh/hcc/fc/
Homeowners in bankruptcy may still be eligible
foreclosure proceedings will be suspended for a period of 90 days to prove the homeowners can make the modified payments. If homeowner defaults on modification plan, they are not eligible for any additional modifications incentives given to lenders to allow short-sales or deeds-in-lieu instead of foreclosing
second mortgages and lines of credit may be extinguished (to be determined)
voluntary participation in the program for lenders, but participation will be required if they receive Financial Stability program funds. Private Mortgage Insurance (PMI) companies have agreed to work out settlements on modified loans.
Homeowners will not be be getting their mortgages reduced as a part of this program. Sorry, but you borrowed the money and the government is not looking to pay it back for you, just yet. But the way things are going, who can tell.
It might be cheaper to buy every defaulting American's home than do what they are doing. After all, if I had no mortgage payments to make, I might buy a new car. Made in Japan of course.
Procedures to reduce a home owner's payment to qualify:
Lenders may add to loan amount to be modified:
accrued interest
past due real estate taxes and insurance premiums
delinquency charges paid to third parties in the ordinary course of servicing and not retained by the lender
any required escrow advances already paid by the lender and any required escrow advances by the lender that are currently due and will be paid by the lender during the Trial Period
Late fees are not included
The interest rate will be reduced in 1/8% increments (subject to a floor of 2%) until the payment equals 31% of the home owner's income
extension of the term of the mortgage up to 40 years is allowed
The 40-year term begins at the start of the modification (after the borrower successfully completes the Trial Period).
IF necessary forbearance of principal is allowed. If there is a principal forbearance amount, a balloon payment of that forbearance amount is due:
on the maturity date
upon sale of the property
or upon payoff of the regular mortgage
the modified balance must be no lower than the current property value
there is no requirement to use principal reduction under the Home Affordable Modification program
These are most of the details most relevant to homeowners who might be in need of this program.
