Federal Help to Avoid Foreclosure
The U.S. federal government introduced a financial stability plan in 2009 to address an increase in foreclosures in the midst of an economic downturn and rising unemployment rates. That gave rise to the Making Home Affordable plan, which includes several programs intended to help homeowners avoid foreclosure. The programs don't provide any direct funding, but they do offer ways for homeowners to lower their monthly mortgage payments.
Other People Are Reading
-
Function
-
The Home Affordable Modification Program is intended to help homeowners modify their home loans to make them more affordable if they're having problems making mortgage payments. Homeowners need to apply for a modification with their lenders and provide information about their financial situation, including their current income. However, not all lenders are participating in the program. Ask your lender about other options to help make your mortgage more affordable if your lender is not participating in the program. One option, known as the Home Affordable Refinance Program, gives homeowners with Fannie Mae or Freddie Mac loans the opportunity to refinance their mortgages to reduce their monthly payments.
Considerations
-
Some homeowners are struggling to pay their home loans because they've taken out a second mortgage to get extra money to pay other bills. The Second Lien Modification Program allows homeowners to modify their second mortgages to lower monthly payments on those loans. In such cases, lenders may choose to reduce the interest rate or extend the life of the second mortgage to 40 years to reduce a homeowner's payments. The program also includes incentives for lenders who choose to cancel homeowners' second mortgages. However, consumer information on the program is not specific about the types of incentives lenders can receive.
-
Prevention
-
Homeowners who find that a mortgage modification still won't make their homes affordable or help them avoid foreclosure might consider the Home Affordable Foreclosure Alternatives Program. In such cases, a short sale or deed-in-lieu of foreclosure may be completed. Those options allow homeowners to move out of their homes to more affordable housing, which alleviates their mortgage debt without a foreclosure. Lenders who agree to a short sale know that homeowners may sell their properties for less than what's owed on their mortgages, but they recoup as much of the balance as possible. A deed-in-lieu of foreclosure allows borrowers to transfer ownership of their properties to their lenders.
Counseling
-
Housing counseling agencies approved by the U.S. Department of Housing and Urban Development also are available to homeowners around the nation. The agencies provide free counseling to homeowners in an effort to help them avoid foreclosure. Counselors will evaluate people's financial situations and outline their options for making their mortgages more affordable in an effort to help them keep their homes.
Process
-
The federal government has streamlined the review process for mortgage-modification requests by reducing the amount of paperwork homeowners need to submit for consideration. Be prepared to provide pay stubs or other documentation verifying your income with a modification application. You also will need Internal Revenue Service form 4506T-EZ. The form gives your lender permission to request a copy of your most recent tax return.
-
