This act expands on a previous one, Hope for Homeowners, that essentially failed to help distressed homeowners. Because of the many administrative problems and stringent requirements only very few homeowners were about to refinance high-interest rate home loans for a 30-year fixed loan that was backed by the Federal Housing Administration. The previous law was intended to assist around 400,000 American homeowners but failed to do so. This new piece of legislation eases the previously tough eligibility requirements. It also promises to lower the cost of loan modification for both borrowers and lenders. It is hoped that these improvements will help the housing market, weighted down by foreclosures and distressed home sales, recover over the next 2 years

There is still a lot of red tape to deal with when seeking to negotiate a new home loan with a lender, especially when one is behind on payments or significantly ‘underwater’, meaning that the homeowner owes more on a mortgage than the home is currently worth on the housing market. Many people who’re seeking a loan modification due to being stuck with unaffordable house payments have reported considerable backlogs and confusing submission rules. Will the Helping Families Save Their Homes Act improve this situation? It’s too early to tell at this point. One bright point though is the related Making Home Affordable program which has been able help around 50,000 homeowners obtain more affordable terms for their mortgages.

It is hoped that these improvements in home loans will help slow the supply of foreclosed homes since this, in turn, tends to lower prices on everyone’s home. This year may see as many as 2.5 million foreclosures and could potentially negatively impact as many 20% of all US homeowners within the next 2 years if improvements in the market don’t occur quickly. It is hoped that this new program will kick in quickly and reverse this trend.

The bill failed to include a measure that would have allowed bankruptcy judges to modify the terms of a home loan to reduce a homeowner’s monthly payments should they go into bankruptcy. Industry pressure prevented this part of the measure. However, the Helping Families Save Their Homes Act does include a provision to protect renters when their landlord is foreclosed on. Under this new law, renter’s leases must still be honored and, should they be on a month-to-month basis, the law requires that they be given a minimum of 90 days notice. Another key provision of the law is that loan servicing companies are protected from investor lawsuits, aka a “safe harbor”, when they modify loans to prevent foreclosure under the government loan modification guidelines.

If you are seeking a mortgage modification for yourself, make sure that you pick the best option for you. There are scams out there so be careful. Also be aware that some modification programs simply add missed payments to the principle of the loan, ultimately making the home loan less afforable. Some homeowners who have had this kind of modification found themselves once again facing foreclosure when new, higher, house payments kicked in a year or so later. Make sure that you work with a HUD-approved credit counselor in this difficult process.

Another common problem is that loan service companies are swamped with loan modification requests from distressed homeowners seeking help. Many do not have the staff to handle the volume of requests and either don’t answer phones or use cheap outsourced labor from outside the US. Also, since it usually requires several calls to get a loan modification processed, this often means starting over from scratch several times. While this is frustrating, make sure that you are prepared to assist the customer service representative get up to speed quickly on your case. Don’t assume that they have everything they need handy.

If you need help in adjusting your mortgage I encourage you to investigate your options under the Helping Families Save Their Homes Act. It may just help you in your foreclosure prevention efforts.

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This new program, Making Home Affordable, that was pushed by the Obama administration should help millions of people  attain lower monthly payments and also avoid foreclosure. But, are there any strings are attached to the program? What are the credit score implications? Are there any tax implications? How could it affect your monthly payments? Are there any scams associated with this program? Let’s take a look.

One of the first questions people ask about the federal loan modification plan if their credit score will be affected. In general, a refinancing plan doesn’t affect your score since it’s just a rewriting of the terms of an existing mortgage loan. What negatively affects your credit score is missing payments. Under the new federal housing relief plan, one of the terms is that qualifying homeowners can’t have missed a payment during the past year. So, if you’ve missed a payment, the new program won’t help you.

It’s still too early to tell how much impact the this federally sponsored mortgage loan adjustment program. There are no credit reporting guidelines in place for these home loan modifications. It’s not even clear if they will be reported at all. However, most people who’re applying for this program will have had some financial problems and missed credit card or car payments will have a negative impact on their credit report. But, in the long run, if a loan modification puts you on the right track financially your credit score will begin to improve. Just make sure that you have a sound financial plan for your own recovery, such as using the savings on your mortgage loan to pay down other debts..

One potential problem in the federal housing relief plan is that your payments might be more. For example, if your home loan is still at a low introductory rate it isn’t out of the question that you may have an increased home payment after the adjustment. However, the up side is that you will avoid any interest rate spikes that are common with subprime adjustable-rate mortgages

Mortgage lenders who’re participating in the Making Home Affordable program are required to provide you with a “good faith estimate” which will include your new interest rate, monthly mortgage payment amount and the total cost of the loan. You should compare the numbers of the refinancing offer with your current loan to insure that it will be and improvement for you.

Another question is when should you apply for this mortgage loan adjustment. Mortgage rates right now are at historic lows and aren’t likely to go much lower but are more likely to rise later in 2009 and into 2010. It wouldn’t be a good idea to wait. Also the Making Home Affordable program expires on June 10, 2010 so you should bear that in mind as well.

As for the tax impact, any charges associated with refinancing a mortgage are currently tax deductible. However, some fees, such as an appraisal or home inspection, are not. Neither are certain attorney’s fees. Also, a lower interest rate will reduce your mortgage interest deduction so you may need to adjust your withholding to account for this change as well.

Should you not qualify for the federal loan modification program you can attempt to negotiate your own refinance or modification of your loan. Many lenders are willing to work with you to help avoid a costly foreclosure. I have mentioned in other articles on this site how to handle these negotiations.

Beware of third party home loan adjustment companies. While some are legitimate there are plenty of scammers out there. Some even operate using the federal loan modification as a cover by using official sounding names or invoking President Obama’s name. Don’t pay any upfront fees or fall for other scams like this. Remember that home loan assistance is always available for free from government approved housing counselors.

I hope this article has helped answer questions you might have about the new federal home loan modification plans.

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First of all, you will want to gather up your financial documents. This should include your mortgage statements, both your primary mortgage and secondary mortgage if you have one. You will also need information that documents your income such as your current pay stubs and most recent income tax return. Additionally, you will want your recent bank statements and investment statements. Lastly, you will need to have other financial information such as amount owed on car loans, credit cards and any other consumer debt.

Now that you have all of your financial information together, go to the Making Home Affordable website and click on the “Find Out If You Are Eligible” link. Next, select the program type that best fits your situation, either loan modification or refinancing. You may want to review both your options to see which you’re most qualified for. If you don’t qualify for either program based on their web application and still feel that you need assistance with your home loan, don’t get discouraged. You may still qualify for other programs or for lender based loan modifications.

After you’ve determined your qualifications for the Making Home Affordable you will want to get in contact with a HUD-certified housing counselor. You can find one by calling the HUD information line at 1-888-995-4673 or going to the Department of Housing and Urban Development Foreclosure Avoidence Web site. You should be prepared to take notes when you speak with a housing counselor on the phone. Jot down the names of the people you talk to, the date and time as well as the basics of the conversation such as promises that were made or if your were denied. You should also receive a case number. I recommend keeping a notepad handy for this purpose because staying organized is quite important in this effort.

If your current lender gives you a hard time in your refinancing efforts, a new rule change may help you. This new rule allows homeowners who have a mortgage that is guaranteed by Freddie Mac to refinance with any Freddie Mac affiliated lender. You will also be able to roll a larger percentage of you closing costs into the refinancing as well. This additional flexibility in the program should help those who’ve had frustration in obtaining a home loan modification under the current rules from certain lenders.

It is important to remember that you must be current on your mortgage loan to qualify for a government-sponsored refinancing plan. Should you be behind on your home loan you may still qualify for a loan modification under the Making Home Affordable program.

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Perhaps the most important thing you can do when you’re facing a pre-foreclosure is to contact your lender. This can be difficult for people to do because of the shame and stress associated with a difficult financial situation. When you contact your lender about your financial situation you will probably start with the customer service number on your mortgage statement. However, this may just be a service company who’s acting on the behalf of the actual lender. Make sure that you ask them if they’re the actual company who holds the loan or if they’re simply servicing the loan. If they’re a service company, try to get a number for the loss prevention department at the actual mortgage holder and contact them. Sometimes you may need to speak with a supervisor to obtain this information. If it’s the loan holder that you’re speaking with, start with customer service although you may need to move up the corporate ‘food chain’ as your case progresses.

If you’ve received a default or intent to foreclose notice it is quite important that you deal with it as soon as possible. Contact the number on the notice after you gather all the information you need. You don’t want to be on the phone with them unprepared or stressed out. Get organized and put yourself in a calm frame of mind. When speaking with them, keep your voice low and calm as best you can. This will help you stay calm even though you’re sure to be stressed and will make them less likely to try collection intimidation tactics on you.

Before calling make sure that you have a game plan in place to explain how you will deal with the pre-foreclosure situation that you find yourself in. You should have complete knowledge of your current income and expenses. You’ll need to know how much equity, if any, you have in the home. Be prepared to explain to the lender why you missed your house payments. If you’ve had a temporary setback, like a health problem or job loss, explain this to them and let them know what steps you’re taking to get back on your feet financially.

Also, try to come up with a reasonable plan to present to the lender prior to your call. If you can afford to pay for your home, make a reasonable payment proposal that’s feasible for both you and the lender. If you feel that you can’t afford to pay the mortgage as it is, let them know this as well. Then you can work through the alternatives to foreclosure that might be available to you. For example, the “Making Home Affordable” government program, that went into effect on March 4, 2009, provided $75 billion in incentives for lenders to assist in refinancing loans for troubled borrowers. Mortgage lenders may have other options too and are more willing to work with borrowers in today’s economy. Even though you may still lose your home the financial and credit repercussions will be less.

You will want to keep a record of all contacts you have with your lender. You should note the date and time of the call as well as the name of the person you spoke to and their title and department. Having good documentation of your communication is essential to getting a good outcome in a pre-foreclosure situation.

If you feel that you can’t handle this situation well yourself, then you should enlist the aid of a legitimate housing credit counselor. These counselors are trained to assist borrowers who’re facing foreclosure with sound financial advice and are certified by the Department of Housing and Urban Development. You can find a list of certified counselors at the HUD web site. Other national groups that can assist borrowers with credit problems include the National Foundation for Credit Counseling, Neighborworks America and Hope Now. Make sure that you deal with a certified, non-profit, housing credit counselor and be careful about scammers posing as such.

I hope that this article will help you if you’re facing a pre-foreclosure.

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Perhaps you are at the point where you are certain that you will lose your home simply because you can no longer afford it. Maybe you have already been considering a short sale in order to avoid a foreclosure. Unfortunately, if you’re like many people, you may have found it difficult to get the mortgage lender to agree to sell your home for less than what you owe.

This situation has become common since the housing meltdown began. Often it takes months for an overwhelmed mortgage lender to respond to a short sale request. By then, it’s often too late because the buyer has gone elsewhere and the lender’s foreclosure department, or worse yet, their attorney or foreclosure legal services firm, may have started legal proceedings. What’s more, there have been no clear guidelines as to what types of short sale offers were acceptable. Beyond that, many borrowers also have second mortgages that further complicate the situation.

During the current housing crisis only about half of short sale offers have been accepted nationwide. In some hard hit regions, this number is less than 20%. As a result, many real estate agents have stopped listing short sale homes. This inability to close on homes in the short sale process has resulted in most of these homes winding up in foreclosure anyway. This is what the new Government Short Sale Program, the Home Affordable Modification Program, is supposed to correct.

Under this program, when a troubled homeowner decides to list their home as a short sale, mortgage lenders are required to respond to any short sale offers within 10 days. Additionally, the Home Affordable Modification Program also provides a number of incentives to both the homeowner, mortgage loan servicers and secondary lenders.

Under the program, homeowners get $1,500 to assist with moving expenses and cannot be charged any administrative fees for participation. Most importantly, borrowers are released from all legal obligations associated with the loan. This provision prevents mortgage lenders from seeking a deficiency judgment against the homeowner. These judgments can result in wage garnishment and other financial punishments in many states.

Loan servicers get $1,000 to help cover the cost of paperwork. Plus, the home is sold so they don’t have the additional overhead of maintaining a vacant house and trying to resell it, which can become very costly in some areas. For secondary lenders, there are up to $3,000 in incentives to encourage them to participate in the short sale offer.

To qualify for the Home Affordable Modification Short Sale Program you will have had to have unsuccessfully tried to get a mortgage modification through the program. Naturally, the property in question must be your principal residence. The mortgage loan must have been made prior to January 1, 2009 plus it must be guaranteed by Fannie Mae or Freddie Mac.

Additionally there are financial requirements. First of all, you must be behind on your mortgage. Your total monthly mortgage payment has be be more than 31% of your monthly income before taxes. Lastly, you cannot owe more than $729,750. Remember that lenders will check for any hidden income and/or assets and the tighter application process allows lenders to have greater access to a borrower’s financial information.

The Home Affordable foreclosure alternative program will expire on December 31, 2012 unless Congress decides to extend it. Let’s hope that the economy and real estate markets improve significantly by then, thus eliminating the need for the program.

Will the new Home Affordable Modification Short Sale Program help you get out of a home you can’t afford with as little financial and credit damage as possible? Maybe, but the results of the government loan modification program haven’t been that great since it was launched over a year ago. However, it is worth a try if you qualify for it.

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