Option 1st Financial Blog

The last few Blogs have been devoted to providing information on President Obama's Home Affordability and Stability Plan which has generated a lot of interest. This interest is certainly reflected in the hundreds that have visited my Blog to read the details of his plan and the many who check back daily for updates on the plan. Well, the wait is over as the Administration has created a website that you can visit (http://makinghomeaffordable.gov/), to determine if you are eligible for either plan.  

The MakingHomeAffordable.gov website offers features including interactive self-assessment tools that empower you to determine if you're eligible to participate in either plan and to calculate the monthly mortgage payment reductions that you could realize under the Making Home Affordable program.

The website also features resources to find free, HUD-approved counseling services for anyone that has additional questions. But, just a reminder that while the self assessment tools will indicate whether you are eligible for either plan, only your loan servicer can determine if you qualify. To qualify, you will generally need to show sufficient income to make the reduced payments on an ongoing basis.

Just a bit of advice, if you are underwater (meaning that you owe more than the value of your home) on your mortgage or behind in your payments, do not pay anyone to negotiate with your mortgage company. Many of these businesses are operating illegally and HUD offers help for no cost. Many of the companies that offer to help charge a few thousands dollars upfront. Save your money, contact your mortgage company directly and negotiate yourself. Many lenders have packets online that you can access, complete and submit yourself. Go directly to your lender's website or call and request a copy of the packet that you need to complete for consideration of a loan modification or refinance and remember to mention "the Obama plan". As always, best of luck and I am available as a resource should you have questions!   

Keeping with our goal to provide timely information on any new details related to the Obama Adminstration's Making Home Affordable Program, we are providing the latest information (announced earlier this week) taken directly from the White House. Please encourage family and friends that could benefit from this program to visit our Blog to keep up to date with the latest developments. As always, best of luck with whatever your situation is and just a reminder that we are here to answer your questions either via email or phone. 

Obama Administration Announces New Details
on Making Home Affordable Program

Parallel Second Lien Program to Help Homeowners Achieve Greater Affordability

Integration of Hope for Homeowners to Help Underwater Borrowers
Regain Equity in their Homes

WASHINGTON – The Obama Administration today announced details of new efforts to help bring relief to responsible homeowners under the Making Home Affordable Program, including an effort to achieve greater affordability for homeowners by lowering payments on their second mortgages as well as a set of measures to help underwater borrowers stay in their homes. 

"With these latest program details, we're offering even more opportunities for borrowers to make their homes more affordable under the Administration's housing plan," said Treasury Secretary Tim Geithner. "Ensuring that responsible homeowners can afford to stay in their homes is critical to stabilizing the housing market, which is in turn critical to stabilizing our financial system overall. Every step we take forward is done with that imperative in mind."

"Today's announcements will make it easier for borrowers to modify or refinance their loans under FHA's Hope for Homeowners program," said HUD Secretary Shaun Donovan.  "We encourage Congress to enact the necessary legislative changes to make the Hope for Homeowners program an integral part of the Making Home Affordable Program."

The Second Lien Program announced today will work in tandem with first lien modifications offered under the Home Affordable Modification Program to deliver a comprehensive affordability solution for struggling borrowers. Second mortgages can create significant challenges in helping borrowers avoid foreclosure, even when a first lien is modified. Up to 50 percent of at-risk mortgages have second liens, and many properties in foreclosure have more than one lien.  Under the Second Lien Program, when a Home Affordable Modification is initiated on a first lien, servicers participating in the Second Lien Program will automatically reduce payments on the associated second lien according to a pre-set protocol.  Alternatively, servicers will have the option to extinguish the second lien in return for a lump sum payment under a pre-set formula determined by Treasury, allowing servicers to target principal extinguishment to the borrowers where extinguishment is most appropriate. 

Separately, the Administration has also announced steps to incorporate the Federal Housing Administration's (FHA) Hope for Homeowners into Making Home Affordable.  Hope for Homeowners requires the holder of the mortgage to accept a payoff below the current market value of the home, allowing the borrower to refinance into a new FHA-guaranteed loan.  Refinancing into a new loan below the home's market value takes a borrower from a position of being underwater to having equity in their home.  By increasing a homeowner's equity in the home, Hope for Homeowners can produce a better outcome for borrowers who qualify. 

Under the changes announced today and, when evaluating borrowers for a Home Affordable Modification, servicers will be required to determine eligibility for a Hope for Homeowners refinancing.  Where Hope for Homeowners proves to be viable, the servicer must offer this option to the borrower.  To ensure proper alignment of incentives, servicers and lenders will receive pay-for-success payments for Hope for Homeowners refinancings similar to those offered for Home Affordable Modifications.  These additional supports are designed to work in tandem and take effect with the improved and expanded program under consideration by Congress.  The Administration supports legislation to strengthen Hope for Homeowners so that it can function effectively as an integral part of the Making Home Affordable Program.

Making Home Affordable, a comprehensive plan to stabilize the U.S. housing market, was first announced by the Administration on February 18.  The three part program includes aggressive measures to support low mortgage rates by strengthening confidence in Fannie Mae and Freddie Mac; a Home Affordable Refinance Program, which will provide new access to refinancing for up to 4 to 5 million homeowners; and a Home Affordable Modification Program, which will reduce monthly payments on existing first lien mortgages for up to 3 to 4 million at-risk homeowners.  Two weeks later, the Administration published detailed guidelines for the Home Affordable Modification Program and authorized servicers to begin modifications under the plan immediately.  Twelve servicers, including the five largest, have now signed contracts and begun modifications under the program.  Between loans covered by these servicers and loans owned or securitized by Fannie Mae or Freddie Mac, more than75 percent of all loans in the country are now covered by the Making Home Affordable Program.

Continuing to bolster its outreach around the program, the Administration also announced today a new effort to engage directly with homeowners via MakingHomeAffordable.gov. Starting today, homeowners will have the ability to submit individual questions through the website to the Administration's housing team. Members of the Treasury and HUD staffs will periodically select commonly asked questions and post responses on MakingHomeAffordable.gov. To submit a question, homeowners can visit www.MakingHomeAffordable.gov/feedback.html.  Selected questions from homeowners across the country and responses from the Administration will be available at www.MakingHomeAffordable.gov/asked-and-answered.html.

For the past several weeks, my Blog has featured information on President Obama's Home Affordability and Stability Plan. Under this plan, if you own a home and have been late on your mortgage payment, are behind on your mortgage payment, or you owe your lender more than the value of your home, you may be eligible for either a refinance or loan modification. If you are unfamiliar with the provisions of the plan, I would encourage you to review my previous Blogs to educate yourself about the possible options available.

To continue this series in helping homeowners that find themselves in one of two of these situations, this edition of my Blog focuses on the unscrupulous companies, representing to homeowners that they can facilitate a loan modification for an upfront fee, typically in the range of a few thousand dollars. According to the FBI and the U.S Attorney General's Office, beware of these companies. Both agencies are fielding more complaints and pursuing legal charges against such companies that have taken advantage of homeowners already down on their luck and desperate for help to avoid loosing their home.    

First, many of these companies are operating illegally, if they are asking for a fee up front and are doing business in Maryland. If you have been approached by phone or through the mail, please ignore these solicitations! And, if you have already given any company money upfront and you live in Maryland, I would encourage you to contact either the State of Maryland's Attorney General's Office, at 410.576.6300 or 888.743.0023 or the Compliance Division of the Department of Labor, Licensing, and Regulation at 410.230.6100, again if you live in Maryland. 

So, your next question may be, so what should I do if I think that I am eligible for one of the two programs available through the Home Affordability and Stability Plan? First, visit my previous Blog that links you to the self- assessment tool which will give you an indication of whether or not you are eligible for one of the two programs. If you are eligible, it doesn't mean that you are approved; only your lender can approve you for a program. But your next step should be to contact your lender directly!

Your lender will walk you through the process of applying for whichever program is appropriate. Why, there is a financial incentive for them to do so! But, here's a heads up, generally, your lender will require the submission of the following documentation as part of their evaluation process:

• Most recent earnings statement over a 30 day period
• Most recent bank statements over a 3 month period
• A hardship letter, explaining why you are behind on your mortgage, in the case of a loan modification
• The completion of their financial statement which is a record of your monthly income and expenses 

The above requirements is by no means meant to represent an exhaustive list of the documents your lender may require but simply serves as a guide to prepare you for what your lender will probably require at minimum. 

If you think that you might be overwhelmed by the process of negotiating with your lender, there are a number of nonprofit organizations (NPOs) that will assist you for free. You can contact the U.S. Department of Housing and Urban Development (website address http://www.hud.gov/foreclosure/) for their list of approved NPOs. But, you must be patient as so many people are in need of help and therefore, it may take some time for the NPO to get back to you. If time is an issue for you, I would suggest that you contact your lender immediately and negotiate with them directly. 

I hope that you find this information to be helpful and timely. And, as always, best of luck and give a call should you have any questions!

Reminder to visit our home page where you can receive a complimentary copy of the estimated value of your home under the Home Price Index.