How to Avoid Foreclosure With The 'Home Affordable Modification' Program

Member

By georgelarson
User-Submitted Article

Article Rating: (5 Ratings)

Avoid foreclosure with the U.S. Treasury mortgage modification program.

There is assistance to help avoid foreclosure by making your house payment more affordable. If you are one of the 3 to 4 million homeowners struggling to keep your home loan paid or have missed payments 'Home Affordable Modification', the new program offered through the U.S. Treasury, offers help. Here is how to participate in the home loan modification program.

Difficulty: Challenging

Instructions

Step 1

Eligibility for Mortgage Modification

• Own and occupy your home.
• Your unpaid principal balance is less than $729,750.
• The home loan was activated before 1-1-2009.
• Your current mortgage payment, all inclusive with insurance, taxes, etc., is greater than 31% of the household gross income.
• You are no longer able to make your mortgage payment due to an unexpected change in income or an increase of expenses.
• Your loan servicer will require documentation of your income and expenses and evidence of the hardship or change in your circumstances.
• To find a participating servicer go to www.makinghomeaffordable.gov.
Step 2

Apply For a Mortgage Modification to Help Avoid Foreclosure

• Ensure that you meet the eligibility criteria.
• Pull together the following documentation.

o Recent pay stubs of all the borrowers on the mortgage loan.
o Last year's income tax return.
o Documentation about all assets and a second mortgage.
o Print out with balances and minimum monthly payments for all credit cards and all other debts.
o A detailed letter describing why your are in default or why your mortgage is unaffordable.
• Call your home mortgage servicer and ask to be considered for a 'Home Affordable Modification'. For a list of servicers who have signed up to participate go to http://www.makinghomeaffordable.gov.
Step 3

Process for Home Mortgage Modification to Avoid Foreclosure

• Find a bank or mortgage company (servicer) that is participating in the mortgage modification program.
• They will determine whether your loan meets eligibility criteria.
• Require proof of your current income, assets and expenses and evidence of the specific circumstances relating to the hardship. This will help to determine if you will be unable to make your mortgage payment.
• Determination that the monthly payment on the home loan is greater than 31% of the gross income of everyone listed on the mortgage.
• Late fees must be waived but other charges including insurance, interest, taxes, etc. will be added to the loan balance.
• Calculate what interest rate reduction will be required to get your mortgage payment below the 31% of income level.
• The servicer will go through, and apply, a 'value test' which will determine if the cost of the modification is less costly for the investor than not modifying the loan.
• The U.S. Treasury is providing incentives to your servicer to write the interest down to 2%, if necessary.
• If it is you will be put on a three month trial with the new interest rate and payment level.
• If you make the new mortgage payments on time throughout the trial period your servicer will draw up a permanent modification to the lower fixed interest rate for a five year period.
• The mortgage modification interest rate will then be capped at the low rate for the life of the loan.
Step 4

Additional Benefits For Borrowers to Avoid Foreclosure

• If your house is scheduled for foreclosure, call your servicer right away. Many have made a commitment to postpone foreclosure sales on mortgages that meet the minimum eligibility criteria for a 'Home Affordable Modification'.
• There is no mortgage modification fee for borrowers who qualify for a 'Home Affordable Modification'.
• There are success incentives to borrowers who successfully make timely mortgage payments. The U.S. Treasury will pay an incentive for every month you make a payment on time. This will be applied annually to your loan balance for the five years and could add up to $5,000.

Comments

kattwoman2 said

Flag This Comment

on 4/11/2009 This is a very interesting article on avoiding foreclosure. Have you heard about the Ohio representative who is telling people to stay in their homes and NOT give into foreclosure before talking to a lawyer? She's my hero! Especially since the ones that are doing it are people who tried calling their banks but their banks would not listen.