Everyone is well aware that the United States government has created several interesting programs to help homeowners who are facing foreclosure or those who have seen their home values drop well below the amount they are carrying on their mortgage. These programs are diverse in scope and include:
- Refinancing -regular refinancing does not fall under the Homeowner Affordability and Stability Plan, but the refinancing of mortgages that are at no more than 105% of the homes value are currently available. This may not save all borrowers because many people are carrying a first mortgage and an equity loan product of some kind. Though they may be able to refinance the individual loans for better terms and rates, few will be able to roll them into a single entity if their total value exceeded the value of the property by more than that 105% cap.
- Modification -loan modification was an unusual approach to remaining in a home or property prior to this current financial crisis, but the fact of the matter is that banks cannot continue to maintain thousands of empty homes and also function with the defaulted loans. In order to facilitate an improvement in credit and banking conditions, the federal government offered billions of dollars in support to banks who work with mortgage holders to modify the loans. These modifications have limitations however, including:
- Balances must be less than $729,750 to qualify
- True financial hardship must be proven by the mortgage holder. This is done via official forms and worksheets as well as the creation of a proposal with documentary evidence including pay stubs, bank statements, bills, etc.
- The original mortgage must have originated prior to 1/1/09
- All properties must be primary residences or owner-occupied
- Some arrangements for catching up on overdue or missed payments may be required as well. There are also some federally supported loans for those who need to borrow back payments before they are approved for their modification
- Short sales -though this is the least preferred option for everyone involved, if a homeowner is truly unable to remain in the property, the federal government is offering some financial support to banks that accept what are known as short sales. These are sales of homes for less than the standing mortgage. If the bank agrees to protect the credit score of the original borrower, consider the mortgage paid in full (even though it is technically short of funds), and close the issue, they may receive the full difference in return.