YOU’VE probably heard about President Obama’s housing plan to help the housing market back on track. The goal of the program is to help up to 9 million families facing foreclosure to either refinance or modify their mortgages. The Treasury Department has provided the details about how the plan works. You can go to www.makinghomeaffordable.gov for more information.
The program is in 2 parts. One part of the program is designed to help homeowners whose mortgage is owned or backed by Fannie Mae or Freddie Mac to refinance into a fixed rate. If you owe more than the value of your house, you may still qualify but your new mortgage cannot exceed more than 105% of your property’s current market value. Here in California where real estate values have plunged to as low as 50% of the current mortgage amount in certain areas, it would be difficult to qualify for refinancing under this program. This article ONLY discusses the Loan Modification part of the program as this is what most people are interested in.
First of all, you need to understand that the plan only works for people who make enough money to be able to afford their modified loan. So if you are unemployed or do not have enough income to be able to pay the modified loan payment, you are not going to qualify. I should also add that if your are overextended on all other debts (credit cards, car payments, personal loans, etc.), so that your total debt payments including your mortgage are 55% or more of your monthly gross income, you need to do something about your other debts in order to make this plan work for you.
Secondly, you must remember that this is strictly a voluntary program and your lender is not obligated to participate. However, several of the largest mortgage servicers such as Bank of America, Wells Fargo and Citigroup have said that they will participate in this program. Your mortgage amount cannot exceed $729,750. In some cases where loans have been sold to an investor that is not owned or backed by Fannie Mae or Freddie Mac, a loan modification will not be possible.
A lot of people are asking if their mortgage balance will be reduced especially if they home is "upside down". The answer is YES, it is possible for a lenders to reduce the principal but they are NOT required to. To lower your mortgage payment, lenders will lower your interest rate or extend the payment terms to 40 years if necessary. Lastly, if you have a second mortgage, the amount can be forgiven if the Treasury makes a cash offer to have the debt forgiven. The lender, of course, is not obligated to accept the cash offer but it may be likely to accept it since that lender will probably receive nothing if the house goes into foreclosure and especially if the homeowner ends up filing for bankruptcy to wipe out a collectible foreclosure deficiency.
Lastly, if you do not qualify for loan modification under the Obama plan, your lender may have its own loan modification program. Call the company who services your mortgage for more information. You don’t need an attorney or anyone to help you with a loan modification. However, a lot of people are confused about the process and do not understand what information they should be providing their lender when they apply. Banks themselves are overwhelmed and often disorganized which makes it even more difficult, time-consuming and frustrating for distressed homeowners. It costs money to hire a law firm to do the negotiating for you but having a knowledgeable and experienced professional on your side who can fight for you can be worth it if you get the results that you need. After all, you may only get one chance at doing this especially if time is running out so why take your chances? As a last option to deal with foreclosure, bankruptcy can also sometime be an effective strategy.
For a free consultation, call Toll-Free 1-866-477-7772. Let us evaluate your situation and recommend possible options. We have offices in Glendale, Cerritos and West Covina.
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None of the information herein is intended to give legal advice for any specific situation. Atty. Ray Bulaon has successfully helped over 4,000 clients in getting out of debt. For a free attorney evaluation of your situation, please call Ray Bulaon Law Offices at TOLL FREE 1-866-477-7772.
( Published on July 1, 2009 in Asian Journal Los Angeles p. B2 )
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