Asian Journal- The Filipino-American Community Newspaper

Question: What is an FHA guaranteed loan?

Answer: The Federal Housing Administration (FHA) insures the loan secured through its list of approved lenders where borrowers can secure a mortgage for their home. Beforehand, FHA loans are not covered by the Making Home Affordable program of the government. Only loans secured by borrowers from the banks through Fannie Mae and Freddie Mac qualify under the Obama plan.

Answer: The US Secretary of Housing and Urban Development announced the FHA has implemented a change in its loan modification program to ensure consistency with the Obama Administration’s Making Home Affordable Modification program.

The program permanently reduces the family’s monthly mortgage payment through the use of partial claim, which defers the repayment of mortgage principal through interest-free subordinate mortgage that is not due until the first mortgage is paid off. This will be accomplished by bringing the mortgage current, buying down the loan up to 30 percent of the unpaid principal balance and deferring this amount in a partial claim.

Answer: Borrowers with FHA guaranteed loans should contact their lender and request loan modification. They may also contact a reputable attorney who do loan modification to negotiate with the lender.

Answer: Yes. However, it is better to apply for loan modification before filing bankruptcy because you have a better chance of getting better terms in modifying your loan. Once you filed for bankruptcy you will need to pay whatever are the scheduled monthly payments on the mortgage during and after the bankruptcy proceedings. Only unsecured debts may be reduced or discharged in bankruptcy. Secured debts such as mortgage payments will have to be paid as scheduled or the lender will request the court to lift the automatic stay and foreclose your property.