Government Help for Foreclosure & Refinancing
President Barack Obama created the Making Home Affordable programs to help owners facing foreclosure stay in their homes. These programs provide solutions to unanticipated increases in mortgage payments and make them more affordable. The type of loan, payment history and financial condition will determine whether the homeowner is eligible for these programs. To get the process started, the homeowner must contact his mortgage servicer to obtain an application for assistance.
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Home Affordable Modification Program
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The loan modification program allows homeowners to make their mortgage payment more affordable. Homeowners with Federal Housing Administration-, Freddie Mac- and Fannie Mae-insured loans are eligible to apply for a loan modification. The homeowner's monthly mortgage payment will be reduced to 31 percent of the household's total income for a trial period. If the homeowner successfully completes the trial period making all payments on time, the mortgage will be permanently modified. The home must have been purchased prior to Jan. 1, 2009, for the loan to be modified.
Home Affordable Refinance Program
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This option through the Making Home Affordable program allows owners who have negative equity in their property to obtain a refinance to make the monthly payments more affordable. The refinance will enable the homeowner to get a better interest rate and more stable loan terms. To qualify for the program, the home loan must be insured through Freddie Mac or Fannie Mae. In addition, the homeowner must have a 12-month history of making mortgage payments on time with no late payments. Also, the mortgage payment cannot exceed 125 percent of the market value of the home.
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FHA Underwater Refinance Program
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Homeowners with FHA loans can also obtain a refinance of their mortgage on a property with negative equity. The mortgage cannot exceed 115 percent of the market value of the home. The program is voluntary for lenders, so all homeowners may not be able to participate in the program. Also, the lender must agree to reduce the debt burden by at least 10 percent for the homeowner to receive help through Making Home Affordable.
Housing Counselor
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A Department of Housing and Urban Development-approved housing counselor can help distressed homeowners select the best option for resolving their financial circumstance. The stage of your foreclosure will determine whether you are eligible for help and which programs best suit your needs. Upon request, the counselor will be able to communicate to the mortgage servicer for the homeowner. She can help with obtaining a loan modification or forbearance. The counselor can also provide information on how to spot the foreclosure scams that are being offered. Foreclosure-prevention services are free for distressed homeowners.
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References
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