Homeowner Bailout Programs – For Your Information

Article by Kent Hoover, March 26, 2010 in Portfolo.com

Below is an excerpt from Kent’s article for your information and use.

“Under this program, mortgage servicers would be required to reduce mortgage payments for unemployed individuals to no more than 31 percent of their income for a period of three to six months.

This would help these individuals stay in their homes while they look for a job. If they still don’t have a job at the end of six months, they can work with lenders on a permanent mortgage modification or other alternatives to foreclosure. If they find a job, they’ll resume making their regular payment, and overtime pay back the break they got while they were unemployed.

The other new initiatives are more troubling. Mortgage servicers will be required to consider writing down the principal on loans in cases where borrowers owe more than 115 percent of the current value of their home. The government will provide incentives to servicers to do this, as part of its Home Affordable Modification Program.

So far only 200,000 permanent mortgage modifications have been made through the HAMP program, although 1.1 million borrowers have begun trial modifications. The program was designed to help up to 4 million homeowners.

In addition, the Federal Home Administration will use $14 billion of TARP money to allow homeowners who are underwater on their mortgages to refinance through an FHA loan. To qualify, homeowners must be current on their mortgages and meet FHA underwriting guidelines. Lenders or the investors who bought the mortgage will have to agree to write down the unpaid principal balance of the mortgage by at least 10 percent.”