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US Agencies Ask Lenders to Improve Efforts for Distressed Homeowners

[Jul 29, 2009.]

 

High ranking officials within the US Treasury and the Department of Housing and Urban Development (HUD) met with mortgage lending executives to request that mortgage lenders step up efforts to assist distressed homeowners. Although about 200,000 households have received assistance through government approved loss mitigation programs, the federal government hopes to assist in saving 500,000 homes from foreclosure. Lender progress will be monitored by new reporting requirements that become effective in August. Government emphasis on preventing foreclosure and evictions sets th stage for more homeowners to receive assistance from mortgage lenders. Here's how a mortgage modification or refinance can help.

Mortgage Lenders Offer Modification Options

Mortgage modification means changing the terms of a mortgage loan to reduce payments or otherwise make adjustments to achieve affordability and reduce foreclosure risk:


  • Reduce mortgage rate: Reducing mortgage rates lowers payments and helps borrowers pay off their mortgage loans faster.

  • Reduce mortgage amount: Borrowers who are upside down (owing more on mortgage loans than their homes are worth) can benefit from lowering the amount of their mortgage loans. This provides lower payments and improves incentive for borrowers to keep making mortgage payments. Borrowers who owe up to 125% of their home's value in mortgage debt may be eligible for help through refinancing or modification.

  • Change loan type: Sub-prime mortgage loans and other non standard mortgage loans often have features that cause the mortgage balance to stay the same or even increase. Replacing features including interest adjustments, interest only payments, deferred interest, and negative amortization with fully amortized fixed rate payments takes the guesswork out of making mortgage payments and paying off mortgage loans faster.

  • Adjust Payment due date and extend repayment term:For borrowers who have missed several payments and cannot get caught up, this can "reset the clock" on mortgage payments. Mortgage lenders reset payment due dates to current status, and exten the mortgage term by the number of monthly payments missed.


Getting Help: Contacting Mortgage Companies

Borrowers struggling with making mortgage payments should contact their mortgage company immediately to determine eligibility for modification, refinance and other loss mitigation programs. Homeowners should contact the company (loan servicer) that accepts their mortgage payments and ask to speak to the loss mitigation department. Have the following information ready when calling:

  • Mortgage loan number

  • Your monthly income

  • Monthly expenses

  • Reason for falling behind on payments--Don't lie!

  • Suggestion for resolving the problem: Loan modification? refinance to reduce mortgage balance? selling home at current market value (also called a short sale).


Honesty and cooperation are essential for success. Mortgage servicers typically require a "laundry list" of information when evaluating loans for relief programs; it may be necessary for mortgage servicers  to coordinate approval between lenders and mortgage insurance companies. Keeping frustration in check can be challenging, but is worth the effort when mortgage assistance is approved.

 

About Author:

Karen Lawson is a freelance writer with extensive experience in mortgage banking and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.

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