Who Will The Revised Federal Mortgage Program Help?
The government's bold new plan to stem the foreclosure crisis and limit damage to the overall economy aims to succeed where previous efforts have fallen flat. However, as before, the odds of hitting those lofty goals are small, the risks are there for taxpayers, and many struggling homeowners in the Denver area and nationwide won't even qualify.
In theory, the effort unveiled March 26th would help millions of troubled borrowers who fall into one of two groups: those who are under water in their mortgages, or those who are unemployed and need a break on their payments. This plan, though, depends on the cooperation of investors and bankers, many of whom have been locked in disputes over whether to reduce the debt owed by homeowners. Because of this, and the likelihood that many homeowners will not fit into either of the two groups the program is geared to help, it will probably only benefit less than half of the proposed 3 to 4 million borrowers (around 1.5 million, according to Mark Zandi of Moody’s Analytics).
The program is designed to reach those 3 to 4 million homeowners by the end of 2012. So far, barely a dent has been made in that number. To date, only 170,000 borrowers have completed loan modifications out of 1.1 million who began the Home Affordable Modification Program since it started in 2009. Right now, estimates are that about 6 million homeowners have missed at least 2 months of payments on their mortgages, and it is expected that 10 to 12 million borrowers are in danger of foreclosure over the next 3 years. These figures don’t even take into account the 10 million (or so) homeowners who owe at least 20% more than their homes are worth, which is where the revisions to this plan come into play.
Under this new plan, mortgage companies can cut the total amount homeowners owe, or they can refinance into loans backed by the Federal Housing Administration (FHA). The reductions (if they’re approved by the lender) will happen gradually over 3 years, and FHA will get $14 billion in incentives from the federal bailout fund for this purpose. In order to qualify, homeowners must owe at least 15% more than their homes current value and can not have missed any payments.
For unemployed borrowers, if they’re receiving unemployment benefits and owe less than $729,750 on their home, their mortgage payments can be cut to no more than 31% of their monthly income for 3-6 months so they have time to find another job. If they do find work, they may qualify for a loan modification that would permanently reduce their mortgage payment - if they don’t, lenders will encourage them to consider a short sale.
To apply, call your mortgage company to see if you qualify, and if you are unable to get in touch with someone, visit www.findaforeclosurecounselor.org. If you’re a Denver area homeowner who’s trying to avoid foreclosure, give the Bandy Team a call. We can assist you with finding the best option for your situation, and we’re more than willing to help.
Marianne Bandy
Learn more about local Denver resources
Marianne Bandy
The Bandy Team - RE/MAX Professionals
Denver, Colorado
303-746-7799
www.DenverAvoidForeclosure.com