Help for Upside Down Homeowners

There are approximately 2,172,099 foreclosed homes in the country. Many people are frustrated with trying to find options to remain in their homes and or simply walking away from their homes and moving in with friends or relatives. Others are buying smaller second homes and walking away from their first home before it goes into foreclosure. To avoid doing this and to remain in your home, here are some options that lenders can offer to help you.

Lender Options:
1. Loan modification. Your lender modifies your current loan to make your payments more affordable by lowering the interest rate and/or extending the mortgage term and adding the default amount to the back end of your loan or forgiving it. Provide documentation to show you are experiencing a hardship.
2. Reinstatement. Your loan is reinstated to current status after you pay the default amount and any other costs or fees.
3. Forbearance. Your lender works out a short term payment plan for you to get caught up on your payments. After you are caught up, you go back to paying your regular mortgage payments. Occasionally, the lender will reduce the principal amount on your loan as well.
4. Short Sale. If you cannot afford to keep your home and you are upside down on your mortgage, then a short sale might work for you. Your lender must approve the sale because you would have to sell your home for less than what you owe your lender. As part of your negotiations, you need to make sure that the lender agrees to accept the sold proceeds as satisfying your loan debt.
5. Deed in lieu of Foreclosure. Signing the deed back to the lender, handing them the keys, and walking away owing the lender nothing.
6. Refinancing. If you have equity, you can refinance by obtaining a new loan with a lower interest rate, at a fixed term with a lower monthly payment and pay off your existing mortgage.
7. Gradual interest rate
8. Repayment. Pay the past due amount over a period of months. Read the terms carefully to be sure you can afford the payment.

Here are some programs that can assist you with staying in your home.
1. FHA Secure Loan Program - http://portal.hud.gov
2. Hope Now Program – www.hopenow.com, 888-995-4673
3. Home Affordable Refinance Mortgage Program (HARP) -www.makinghomeaffordable.gov/refinance_yes.html
4. Home Affordable Modification Program (HAMP) - https://www.hmpadmin.com/portal/programs/fha_hamp.jsp
5. Second Lien Modification Program (2MP) –https://www.hmpadmin.com/portal/programs/second_lien.jsp
6. FHA Second Loan (FHA2LP) – https://www.hmpadmin.com/portal/programs/fha2lp.jsp
7. HAFA (Home Affordable Foreclosure Alternatives) Program - https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.jsp
8. FHA HAMP (FHA Home Affordable Modification Program) –https://www.hmpadmin.com/portal/programs/fha2lp.jsp
9. UP (Unpaid Principal) – https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.jsp
10. Retired Veteran Program - www.va.gov

Here are some companies that offer loan modifications:
Debt Stoppers, www.debtstoppersusa.com, 800-440-7235
NACA, www.naca.com/refinance/refinanceTenStep.jsp, 888-404-6222 option 5

If you are behind on other bills such as debt consider working with a financial planner or financial advisor. Bankruptcy should be your last resort.

Beware of Pick a Pay Loans

The next wave of loans due to reset in 2010 are the “Pick a Pay” Mortgage loans. The “Pick a Pay” mortgage loans are where homeowners can choose to pay less than the full monthly mortgage payment and the difference is added on as principal.

When the loan is reset in 5 or 10 years the homeowner is locked into a higher monthly mortgage payment. This may cause a higher increase in foreclosures or bankruptcy filing because homeowners will be unable to make their mortgage payments. Many banks and financial institutions offered this loan such as Wachovia, Golden West, Countrywide, Washington Mutual, First Federal Financial Corp, and Platinum Capital Group.

However, this type of loan neglected to tell homeowners that they could risk having negative amortization and could even up owning more on their home than it is worth because the loan principal would increase between 110 to 125% of the original loan amount when the loan resets.

Mortgage loan officers are worried that is may be harder to help homeowners modify their loans because there will be a large difference in their current mortgage payment and the new mortgage payment when the loan resets.

If you are currently a homeowner and do not have a fixed interest rate that remains the same over the life of the loan please read your mortgage loan agreement and contact your mortgage company to modify your loan to get a fixed interest rate. Contact a hud counselor hud.gov/offices/hsg/sfh/hcc/hcs.cfm or call Hope Now at 888-995-4673 to get help.