Musings on Food, Fun & Real Estate in the Mother Lode
Staying on top of the string of programs created to help homeowners caught up in the perfect storm of a high unemployment, rampant underemployment and declining home values, can be confusing to say the least. Here’s a brief overview of the acronyms spawned by the foreclosure crisis:
HAFA—The Home Affordable Foreclosure Alternatives program was designed to help homeowners to avoid the negative effects of foreclosure by establishing incentives for completing a short sale or a deed-in-lieu of foreclosure. In a short sale, the loan servicer accepts a loan payoff amount from an underwater borrower that is less than the amount actually owed on the first mortgage. With a deed-in-lieu of foreclosure, the borrower transfers ownership of the property to the loan servicer. HAFA provides for $3,000 in relocation assistance after a successful short sale or deed-in-lieu.
HAMP—The Home Affordable Modification Program was designed to help homeowners who are no longer able to make mortgage payments on time due to decreased income or an increase in the monthly payment amount. HAMP reduces a homeowner’s monthly mortgage payment to 31 percent of gross income following a series of steps on the part of the mortgage servicer that can include a rate reduction, a term extension of up to 40 years, deferred principal payments and (possibly) a lowering of principle.
HARP—The Home Affordable Refinance Program enables homeowners whose mortgages are backed by Fannie Mae or Freddie Mac and who owe more than their home it’s worth, to refinance and take advantage of today’s historically low interest rates. Originally, HARP was only available to homeowners whose first mortgage did not exceed 125 percent of the current market value of their home.
HARP 2.0—Dec. 1, 2011, the 125 percent loan-to-value ratio was eliminated, enabling eligible borrowers to refinance under HARP regardless of how far underwater they are on their mortgage.
If you are experiencing financial challenges that have made your mortgage payment unmanageable, you may well be surprised at how much help is available. The kind of help depends on a number of factors depending on your lender, the amount owed on your mortgage, your current payment status, and a range of other factors. The most important fact for financially distressed homeowners to keep in mind: the sooner help is sought, the better.
*an excerpt from the CDPE January Report, Tipping the Scales Towards Foreclosure?. For a copy of the full report visit my web-site http://www.sierrashortsales.com or give me a call at 209-536-3000.