Help on the way
If you’re behind on home loan payments, the government may be able to help
By Joanna Dehn Beresford 04/22/2010
Nicolas Cage won’t benefit from the Obama administration’s newest efforts to prevent home foreclosures, but many homeowners may qualify for assistance.
Economists at Moody’s Analytics estimate that roughly 4.5 million homes are currently in foreclosure proceedings, or that the mortgage payments on these homes stand at least 90 days delinquent. An additional 10 million homes carry loans that are greater than the present value of their properties. According to Mark Zandi, chief economist at Moody’s, the administration’s plan could help as many as 1.5 million of those struggling with home loan nightmares.
So, why won’t Cage, who can’t seem to get rid of his multimillion-dollar Bel Air mansion, reap the rewards of federal assistance? Several reasons.
First, the home is too expensive and he’s too rich. He may not be eligible to claim that particular home as a principle residence, nor can he technically be described as unemployed.
But Cage is a movie star, living in a rare and lofty stratosphere. Mere mortals have a better chance at grabbing hold of the federal government’s recently revised and quantified, outstretched hand of help.
Basically, the current plan is designed to “reduce the amount some troubled homeowners owe on their home loans,” writes Associated Press real estate expert Alan Zibel. It’s a multifaceted approach that features incentives for mortgage companies and other loan providers to reduce mortgage payments, ease up on the unemployed homeowner and offer credit options through loan modification.
Before the federal government unveiled the newest strategies in the first week of April, Bank of America reported from its Calabasas office that more than 20,000 permanent mortgage modifications had been made under the Home Affordable Modification Program. While some researchers remain skeptical about the government’s involvement in market manipulations, others express an optimistic outlook.
“The changes are wide-ranging and significant and have the real potential for bringing the foreclosure crisis to a much quicker end,” Zandi says, suggesting that new programs will increase the number and efficacy of home loan modifications.
Who might profit from government initiatives? The details of the incentive package seem dizzying and Byzantine, and why shouldn’t they, since every home and homeowner tell a different story. But, essentially, the goal is to assist the middle- and working-class unemployed and/or “underwater” (people who owe more money on their homes than the homes are actually worth at this point in time) property owners.
If you’re a relatively fresh and current member of the ranks of the unemployed, “the company servicing your mortgage will be required to offer at least three, and up to six, months of reduced payments,” write Ron Lieber and Jennifer Saranow Schultz, of The New York Times News Service. You have to live in the home to qualify for reductions and the balance on your mortgage has to fall under $729,750. Also, according to Lieber and Schultz, “If one person in the household works and one is unemployed, you will not be eligible if the loan payment is under 31 percent of your current total household income.”
So, maybe one of you should move out? Well, not necessarily. If you’re deep under the surface waters of your home loan, and even if you have refinanced the original loan, you may be eligible for modification of that loan, even if you still have a job. It helps if you are current on mortgage payments to your lender. And you can’t hope for forgiveness on investment properties. You must live in the home as primary residence to qualify. The Federal Housing Administration may facilitate refinancing on existing loans.
Homeowners who have already refinanced and hold a second mortgage on their home “may be eligible for help with a second mortgage even if you’ve already qualified for help with a first mortgage. For people refinancing into an FHA loan, their original lenders must forgive enough principal so that their new, single loan is not more than 115 percent of the current value of their home,” Lieber and Schultz explain.
Lenders should contact clients who qualify for assistance, but don’t wait by the phone.
For information about your particular circumstances, you should do a little research and call mortgage representatives to discuss options. Unless you’re Nicolas Cage, in which case you can contact me directly and we’ll discuss your future over lunch and a bottle of robust Coppola.
Contact Joanna Dehn Beresford at truewrite@yahoo.com.
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