Negotiating With The Lender

The smartest thing to do if you are behind on your mortgage payments is to contact your lender immediately and try and negotiate a mutually agreeable plan that works for both of you so you can avoid foreclosure.   You have several options such as repayment plan, reinstatement, forbearance, mortgage modification, short sale, selling your home or special protection if you are in the military or have a government backed loan.

House Counseling

There are non-profit organizations that are certified HUD housing counselors that can help you avoid foreclosure by negotiating with your lender on your behalf. These non-profit organizations do not charge any fees for their services.  To find a certified housing counselor in your area, visit the HUD website at  http://www.hud.gov/ or call 1-800-569-4287 or TDD 1-800-877-8339 for a housing counselor near you.  Many of these housing counseling agencies also offer credit counseling as well.

Workout Options

Repayment Plan

Your lender may be able to help you work out a repayment plan based upon your income especially if you have reduced income or increased expenses. You will need to provide your lender with information to show that you can pay the new payments though.

Foreberance

The lender agrees not to exercise its legal right to foreclose on a mortgage and the borrower agrees to a mortgage plan that will, over a certain time period, bring the borrower current on his or her payments. Sometimes the lender will forgive some of the debt as well.  The forbearance is only a temporary solution for borrowers that are delinquent on their payments and have temporary financial problems such as a temporary job loss or an illness or divorce.

Modification

A modification of the borrower’s existing loan whereby the lender either lowers the interest rate and/or extends the loan terms adding the arrearage to the back end of the loan or forgiving some of the debt.

Active Duty Military Special Protection

A housing bill was signed into effect in July 30, 2008, provides nine months of protection (formerly 90 days) from mortgage foreclosures for returning service men or women after they are finished with the active duty.  In order to qualify for this assistance, you must have taken out your loan on your primary residence on or before January.1, 2008. As of March 1, 2008, the amount you pay for your monthly housing payment must be 31 percent of your monthly income. President Obama’s new law Protecting Tenants at Foreclosure Act of 2009 was signed into law on May 20 2009.

The legislation protects renters, many of whom are military personnel, so that renters aren’t forced out of their homes if foreclosure occurs and a new landlord takes over. Renters have the right to stay in the home during the entire term of their lease unless the new owner plans on moving into the home. Then in that case, the renter must have 90 days notice before they can be evicted. The 90 days notice applies to renters who are on a month to month lease as well. Also under the Service Members Civil Relief Act Provision enacted into law in 2003, mortgage lenders must reduce the interest rate of active duty military personnel to no more than six percent.

Mortgage Government Backed: Freddie Mac, Fannie Mae, FHA

Under the Homeowner Affordability and Stability Plan, eligible borrowers may refinance even if their homes have decreased in value, into a 30 or 15 year, fixed rate loan if their loans were backed by Fannie Mae and Freddie Mac.

The Homeowner Affordability and Stability Plan also offers help to borrowers who are in default and who wish to modify their mortgage payments.  The Treasury Department is giving lenders incentives to modify existing first mortgages.   Borrowers who pay on time for five years can get up to $5,000 applied to reduce their debt by the end of that period.

For veteran who sell their home in a short sale because the expected proceeds from the sale are not enough to pay off the existing loan, and who do not have other assets to pay off the mortgage, a VA compromise claim will pay the difference.  The veteran remains liable to the VA for the amount of the claim payment. However, the compromise claim is usually less than the mortgage balance, and the veteran gets to save their credit and their home from foreclosure.

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