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Sharpen Your Elbows to Get In on Borrower Bailout

Ah, it was good to see so much detail laid out for the government's new refinance and loan-modification programs for borrowers at risk of foreclosure. The 17 pages of guidelines are government poetry, what with all the acronyms, formulas and step-by-step directions. It makes for lousy reading, but all those details increase the odds that the program will actually work. If you don't believe me, consider the infinitely complicated IRS Form 1040 and its effectiveness at separating you from your money.

If a quick run through this calculator indicates you may qualify for a refinance (available even if falling values have wiped out your equity, as long as you're current on payments) or a loan modification (available if you're behind on payments or on the verge of foreclosure) get your financial documents together quickly and call your lender.

They are going to be swamped with calls. Some of the largest mortgage companies, including Wells Fargo and Bank of America (which is handling old Countrywide loans) have said they are fully on-board with the new government programs. They stand to benefit from having to take fewer empty, devalued homes onto their books, not to mention from the cash rewards they will get from the government when they put borrowers into successful loan workouts. Just don't be surprised if you get busy signals when you call, especially over the next couple of weeks.

What's your take on the new foreclosure-prevention program? Will it help you -- or the economy?

By Elizabeth Razzi  |  March 5, 2009; 6:00 AM ET
Categories:  Foreclosure , Mortgages , The economy , The market  
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Next: Surprise! It's a Bailout for Vacation Homes, Too

Comments

So many unanswered questions. I know it's complicated, but you're the newspaper. Can't you explain it to us with more detail than this? The news article reads like a summary of a summary. How can you have a Freddie or Fannie loan if you owe up to $729,500 (outside of LA or Manhattan)? The loan limits were $417,000 for most of the rest of us (remember the loan has to have been taken out before the first of this year). What is the meaning of signing a hardship statement? How are these people going to stay in their homes if you don't count 2nd mortgages and back taxes? Seems like the lotto to me. Thank goodness, I'm not in this boat and, frankly, have little sympathy for those who have been using their homes as ATMs for the last few years.

Posted by: MKVA | March 5, 2009 10:57 PM | Report abuse

Although it would be great to have the investors/mortgage companies/loan servicers working with their customers in modifying and refinancing loans, which will ultimately end in foreclosure without having to offer financial incentives. The new "Making Home Affordable" plan that was put into action March 4, 2009 is a step in the right direction. The plan calls for refinancing up to 105% of the value of the home. This piece will likely not help those in areas such as Manhattan and Los Angeles were property values have dropped somewhere in the neighborhood of 30-40%. If you do have a second mortgage the refiance will do nothing to modify the terms of that mortgage nor will any of the funds be used as a payoff of that mortgage. You will have the option to negotiate a settlement with that second mortgage if the loan is wholly unsecured by the value of the property. You also have the option of filing bankruptcy where you may be eligible to "wipe out" a second or third mortgage which is wholly unsecured by the value of the property.

The meaning of the hardship letter is so the mortgage company or loan servicer has the reason for the inability to make payments. They want to see that the situation is temporary and that the ability to pay will change sometime in the near future. They use these to show their investors who will question "why", "how" and "when".

Their are many other details of the Making Home Affordable plan and to see if you qualify speak to an authorized housing consultant or to a licensed attorney in your area. You can find more information on our web site at www.FederalHomeRetention.com

Posted by: FederalHomeRetention | March 7, 2009 11:30 AM | Report abuse

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