Refinance & Foreclosure Help
When you face the reality that you cannot make your mortgage payment, you face many questions. Most homeowners who face foreclosure can find a way to stay in their homes, either through refinance or government loan modification programs. The key is to act early before the official foreclosure process begins and to be honest and open with your lender about your situation and your desire to find a mutually beneficial arrangement to deal with it.
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HOPE NOW
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HOPE NOW describes itself as an alliance between mortgage companies, housing counselors, investors and other players in the mortgage industry that work together to find working payment arrangements to allow distressed homeowners to stay in their homes. Homeowners can call the HOPE NOW hotline (888-995-4673) or go online (see Resources) to receive free assistance before going into foreclosure. Housing counselors will help homeowners contact their lenders or find a workable refinance option. This option works well for homeowners whose lenders participate in HOPE NOW.
HUD Housing Counselors
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The U.S. Department of Housing and Urban Development (HUD) offers housing counseling agencies in every state. Like the counselors with HOPE NOW, these housing counselors provide homeowners with information and help to avoid foreclosure. Those whose lenders are not participating in the HOPE NOW program may find help through a HUD housing counselor. These services are offered free to distressed homeowners through nonprofit housing counseling agencies in your local area.
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Home Affordable Refinance Program
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The Homeowner Affordability and Stability Plan passed in 2009 offers a refinance option through the Home Affordable Refinance Program (HARP) to qualified homeowners who are not yet facing foreclosure, but who are struggling with their mortgages. It allows homeowners who are in unstable loan situations, such as interest-only, high-interest or adjustable-rate loans, to refinance at the current market rate in a stable fixed-loan scenario. For some, this lowers the monthly payment. For others, it removes the possibility of increasing or balloon payments in the future. You may be qualified for this refinance option if you are the owner-occupant of a one to four-unit home, your loan is guarantied by Fannie Mae or Freddie Mac, you are still current on your mortgage payments, your loan is not more than 125 percent of the home's current value and you can afford the new payments.
Home Affordable Modification Program
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The Home Affordable Modification Program (HAMP) provides incentives to mortgage loan servicers that are willing to modify mortgages on properties that the homeowners are having trouble paying. HAMP is available to loans originated on or before January 1, 2009, and in which the homeowner is paying more than 31 percent of his monthly gross income toward the monthly mortgage payment, including any escrow accounts. This is available to those who are already facing foreclosure, and it is also available to those who are still current on their loans. Under the modification, lenders may drop the interest rate to as low as 2 percent, extend the term on the loan or defer the principal in order to put the loan monthly payment below the 31 percent level.
Non-Government Help
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If you are facing foreclosure and do not qualify for these government programs, consider talking to your lender directly. Foreclosure is expensive for your lender, and it may be willing to work with you and offer a refinance option that will allow it to avoid the foreclosure process. The best way to increase the likelihood that your lender will work with you is to seek help before you fall too many months behind on your mortgage payments or actually enter foreclosure. Avoid programs that charge a fee for foreclosure help. You can contact your lender or use government resources for free, so this is an unnecessary expense.
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