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How to Avoid Foreclosure and Keep Your Home


There is no place like home. However, if mortgage debt and threats of foreclosure have you sleep-deprived with worry, home may undeniably become a source of stress more than anything else. But there are ways you can prevent the bank from taking back your home. You are not alone as Uncle Sam is here to help.

avoid foreclosure
avoid foreclosure

Since foreclosure is a time-sensitive matter, you`ll need to take action as soon as possible so you have the most options available to you. Speak to your lender and local housing agencies if you need help applying for assistance or more information about any of the programs listed below.

Making Home Affordable

In 2009, the United States Department of Treasury partnered with the Department of Housing and Urban Development to establish programs that would help homeowners avoid foreclosure. The programs belong to the Making Home Affordable legislation.

MHA has helped millions of people avoid foreclosure through various mortgage modification programs, refinancing procedures and other home-saving strategies.

HAMP

HAMP is HMA`s main mortgage modification program. If you qualify under federal law, you can negotiate with your mortgage lender to modify your remaining mortgage payments. This usually results in lower payments on a monthly basis and a more lenient repayment plan overall.

To find out if you qualify, speak to a housing counselor who will look at your mortgage agreement, your overall financial track record and your current financial situation.

The Home Affordable Refinance Program and 2MP

The Home Affordable Refinance Program is able to assist you in refinancing your mortgage if you cannot make the current payments. This procedure is markedly different from mortgage modification because when you refinance, you negotiate an entirely new loan, whereas if you modify your mortgage, you renegotiate some aspects of your mortgage which already exists.

If you have a second mortgage on your house and you`re modifying your first mortgage through HAMP, you can address the second lien through the Second Lien Modification Program. Under 2MP, your second lien is also modified to make your overall monthly debt easier to manage.

Military and the Unemployed

If you are an active member of the military or a Veteran, you may benefit from several MHA programs which were designed to aid in the prevention of foreclosure specifically for people in service. Programs vary but include deferrals and other options.

Similarly, the Home Affordable Unemployment Program program was created to prevent foreclosure for homeowners who are unemployed. If eligible, your lender may lower your payments to 31 percent of your current income or freeze them for a period of time, such as 12 months.

To learn if you qualify for any of this assistance, contact HUD or your lender. While you educate yourself about your options regarding avoiding foreclosure, it is often useful to learn how to manage your finances.

This includes learning about effective credit strategies through recognized resources such as nationaldebtrelief.com. Your HUD housing counselor may have additional information for you in the way of financial education.

Foreclosure Prevention Programs – Hardest Hit Fund Program

In response to the Obama government’s Making Home Affordable Program’s inability in helping delinquent American homeowners save their homes by preventing foreclosures, the federal government has decided to support mortgage debtors in availing affordable and favorable home loan repayment facilities through two new programs supporting foreclosure prevention.

The Housing Finance Agency will help some of the worst affected states with the “Hardest Hit Fund” which will allocate $2 billion to states experiencing high unemployment levels, and the increasing number of foreclosures.

In addition, the Department of Housing and Urban Development (HUD) will provide an additional $1 billion through the “Emergency Homeowner Loan Program” which will aid homeowners experiencing a significant reduction in their monthly incomes due to various reasons like unemployment, underemployment, medical conditions, etc up to 24 months.

The main objective of the proposed programs is to stabilize the fragile housing market by helping responsible homeowners decrease their monthly home loan payments, and make their mortgage more affordable to repay.

home foreclosure
home foreclosure

The federal programs are specially designed to aid the government’s Making Home Affordable Program achieve the proposed results of helping struggling homeowners in saving their homes by preventing foreclosures since the program failed to achieve this in the past.

The allocated $3 billion fund aims to improve the housing market by helping borrowers make their mortgages more affordable, and easier to repay. To learn more about the two programs, it’s suggested you avail the free non-binding counseling provided by RefinanceITT’s attorneys who specialize in foreclosure prevention.

The Hardest Hit Fund (HHF) program offered by the federal government has the main objective of providing emergency relief to homeowners in the states affected the most by bankruptcies and foreclosures.

It was needed to deal with delinquencies related issues and foreclosures at the local level, and configure the home modification and refinance programs options according to the issues and problems faced by the borrowers at community levels.

The HHF will be directly funding the most affected states and will help them utilize the money in aiding the Making Home Affordable Program, designing, and implementing customized and targeted unemployment related programs to reduce the delinquency levels, and also in promoting more affordable home loan redemption.

HHF program is to be provided to states experiencing high unemployment levels which are equal to or above the national average during the last 12 months.

States which have benefited in the past by various federal debt relief programs are to use the money in improving the unemployment levels by executing the specially constructed treasury approved employment generation programs in accordance to the local community conditions.

The objective is to offer temporary financial aid to eligible homeowners in repaying their mortgage, and help them find employment, or alternatively undertake new job training.

You may find some institutions where you simply need to provide them with your contact details to find if you’re eligible for the HHF program. Their attorney will call you and determine your mortgage liability status, and provide you with the required counseling so you can become eligible for the HHF program. The services offered are free and non-binding.

The Emergency Homeowners Loan Program or the EHLP is designed to help homeowners in the states and areas that are not covered by the HFF, and so the program supports the HHF program by creating opportunities and offers financial relief via a “bridge loan”.

A bridge loan is a type of special loan which has zero percent interest and is a non-recourse subordinate loan. According to the program, the states, as well as non-profit institutions, will have to offer:

  • Declining balance
  • Deferred payment loan (A bridge loan) up to $50,000, and aid eligible applicants in:
    Being current on their net mortgage payments (the mortgage principal amount)
  • Getting reduced interest rates
  • Availing affordable mortgage insurance
  • Paying the taxes
  • Getting hazard insurance for up to 24 months.

To become eligible for the EHLP program, the applicant has to:

  • Be delinquent on the monthly payments for at least 3 months, be able to support household expenses, and should be able to make regular mortgage payments within two years
  • Own a single home which has to be the applicant’s primary or main residence
  • Present a decent and acceptable payment history before the decrease in monthly income

HHF and EHLP services

Some financial institutions are willing to provide specialized services to the borrowers having problems with their mortgages. The services include:

  • Studying the mortgagor’s particular debt conditions, and finding out the root cause resulting in the debt
  • Working out a tailor-made mortgage repayment plan which best suits your specific needs, depending upon your monthly cash inflow
  • Negotiate with your lender and make your home loan affordable
  • Make you eligible for the program that’s most beneficial to you

How Do I Escape Foreclosure?

Are you finding it more and more difficult to pay your mortgage every month?  Are you worried that the bank will foreclose before you have the chance to get caught up on your payments?

You’re not alone. With millions of people poised to lose their homes due to foreclosure, the nation is facing a financial mortgage crisis like never before.

Interest is rising. Real estate values are dropping. And far too many of today’s homeowners will soon find themselves stuck with adjustable rate mortgages they had originally planned on refinancing after their initial honeymoon period of low interest/no principal payment periods ended.

Counting on annual pay increases and higher equity to help them refinance in a few years, many are discovering that weak credit, a lack of income and dropping property values have left them responsible for monthly installments that have grown beyond their ability to pay.

With millions of homes in jeopardy, many people across the nation are placing blame solely on the financial institutions which granted mortgages in the last several years using lax loan requirements; slick marketing practices; and a variety of new adjustable-style loans that people neither knew much about nor clearly understood.

Mortgage Crisis

There are many things fueling the current mortgage crisis: interest rate increases; lower property values; and scheduled mortgage adjustments, to name a few.

Homeowners who opted for less traditional forms of financing that allowed them to put off paying normal (albeit higher) interest rates or even principal on their loans for the first few years are now facing the reality of paying for a $200,000 loan on a $50,000 a year income.

Making matters worse, the vast majority of those taking out these adjustable rate loans, also financed most of their down payments and closing costs with a second line of credit in order to buy the house at all.

While some do have the ability to pay a fixed-rate combination loan, they are unable to refinance these 100%-plus mortgages due to a loss in equity caused by dipping property values in many areas across the nation.

Simply put: they now owe more than their houses are worth, which means selling is not even an option unless they have the cash in hand to make up the difference at the closing table.

How to escape foreclosure?

  • Speak to your lender. Assure him that you’ve all the intention to pay your mortgage. Negotiate with him. Even he’ll be willing as he wouldn’t like to take your home back.
  • Look at all your options. Forbearance, Reinstatement, repayment plan and loan modification can help you to avoid foreclosure.

Forbearance is possible if you’ve maintained a good track record like regular repayments till now and no defaults. Then the lender may consider putting off your repayment for a short period of time till you can get your finances in order. This will not affect your credit score.

Reinstatement allows you to show your lender that you have an inheritance or sizeable income with which you’ll be able to pay off the debt at a later date. Once your lender is convinced about your sound financial health that is likely to happen in the near future he’ll relent and you can escape foreclosure.

Repayment plan usually combines a portion of the past due amount with the current payment until the entire delinquent balance is paid in full.

Loan modifications are used to extend the life of the loan in order to keep the payments the same while still paying back past due amounts.

  • Go in for Mortgage Refinancing. This will be a long term solution that will help you to extend the repayment period and also not affect your credit score.

If You Lost Your Job Would You Lose Your Home?

When making the commitment to purchasing a house, it is always worth your while to try and reduce your expenditure as much as possible. It is after all one of the biggest financial decisions that you are likely to make, so when it comes to the possibility of cutting out certain charges, many would be right to exercise hardened cynicism towards any additional or unnecessary costs.

home
home

However, there is one element of home-ownership that requires serious consideration, for it underpins the entire mortgage agreement.

It is, of course, the mortgage repayments, as failure to uphold these could ultimately result in the house being repossessed. For this reason, it is vital to consider what you would do if you became unemployed.

In the eventuality of you losing your job, mortgage payment protection insurance would fund your mortgage obligations for an agreed length of time. This is in exchange for previous, regular payments to the insurance provider.

For those with this form of protection, it is likely that it could make the difference between you keeping or losing the property if you found yourself unemployed.

This type of insurance comes in many forms, but there are other types of insurance that can serve a similar purpose. Income protection insurance, for example, provides an income from which you can meet your repayment schedule, whilst providing enough money so you can live off the excess.

The more extensive means of cover obviously require more expensive premiums, but in exchange, the money paid out would be a greater sum.

There are a number of factors that can affect the premiums that you must pay the insurer. For example, your age will play a large role as typically younger mortgage holders will have greater levels of debt and a less secure stream of income.

This means that the premiums will usually be higher depending on these characteristics. These, as well as many other factors, will be included in a process called underwriting in which the insurance provider looks at the level of risk that you pose to their money and sets your monthly premiums accordingly.

When purchasing a mortgage, or any other product for that matter, it is important that you shop around for the most affordable deal. It is always in your interest to actively research your options and compare prices, and insurance products are no exception.

Always shop around, and remember that if you are uncertain of any part of the process a little diligence now can make all the difference to future payments, so if necessary consider how seeking professional advice may provide benefits for years to come.

Warren Paine

Warren is the senior mortgage loan officer who has worked in mortgages and loan industry since 1995. He study in Harvard and major in Finance with a Bsc. Honor Degree. He possesses a Paralegal Certificate as well.

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