Catch Up On Your Mortgage With Federal Assistance

May 14, 2010 By

The federal government recently released a new Mortgage Modification Program that attempts to make owning a home more affordable. Let’s take a look at the details of this plan, shall we?

Basics for Unemployed Homeowners
Unemployed homeowners will be able to qualify for up to six months of reduced payment. This can help you get back on your feet if you’ve recently lost your job. Also, during the time of reduced payment, you aren’t required to pay more than 31% of your monthly income toward the mortgage.

The federal government has stipulated that the mortgage rates balance must be under $729,750 for a borrower to qualify. Also, you must live in the home in question. Also, if one of the people paying off the mortgage is employed, and the other isn’t, then neither will be eligible if payments are under 31 percent of the total household income.

Most of the time, you’ll be required to furnish proof of unemployment, such as benefits records. If you become employed during this period, the amounts will go back up to the standard payment.

Lender Incentives and the FHA
The government is also creating incentives for lenders to reduce the principal for homeowners who are underwater. Remember, in order to qualify for a reduction in principal, your property has to be worth at least 15 percent less than the value of the mortgage.

Again, you’ve got to fit all of the qualifications listed above to earn these benefits. You can also find a way to refinance using FHA loans and reduce your principal in this manner. The FHA is a great resource for people who want to refinance at reasonable rates.

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The Government’s Home Affordable Modification Program

May 5, 2010 By

The government’s Home Affordable Modification Program is a funded bill that aims to ease mortgage burdens on middle-class homeowners to help them avoid foreclosure. The program aims to “help 3 to 4 million homeowners avoid foreclosure.”

Help for At-Risk Homeowners
The plan works by providing job counseling for unemployed homeowners, recommending to lenders to lower principal payments, providing incentives for lenders to allow loan modifications, and, if all of the above fail, helping homeowners find a home that is more affordable.

The NPV Value
All servicers must run a required “net present value” and an alternative NPV so that they can estimate the profitability of any loan while also making principal write-downs.

Lenders can elect to utilize the alternative NPV if it’s higher than the standard net present value. Therefore, lenders have to consider whether a principal write down and government subsidies will be profitable for them. They can then choose to take the government’s offer, or leave it.

Principal Write Downs
Since soaring principal rates are a huge cause for the housing crisis, it’s difficult for homeowners to get out of difficult mortgages. A write down of principal is one of the easiest and fastest ways for a borrower to obtain affordable mortgage rates.

If you wish to obtain a loan modification, you need to put your requests in writing and submit them to your lender. You should document all your income and expenses, and try to save for a few months so you can offer a good package to your lender. If you play your cards right, then you can get a loan modification easily, and without much trouble.

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How Does A Reverse Mortgage Work?

April 12, 2010 By

1. Basic definition of a reverse mortgage.
The main purpose of a reverse mortgage rates are to allow senior citizens to receive money and avoid making mortgage payments for as long as they stay in their homes. Unlike a conventional mortgage where the borrower pays the lender a monthly amount for the total sum borrowed, a reverse mortgage provides senior home owners who are at least 62 years of age with monetary payments from the lender against their total home equity value used as collateral. The loan amount is determined as a percentage of the home value. In essence, the balance of a reverse mortgage does not have to be paid back until the last surviving borrower either permanently moves away from the property or passes away. At that time, the estate of the borrower has 12 months to either pay off the loan or sell the property. Any remaining equity becomes part of the estate.

2. Providers of reverse mortgages.
Reverse mortgages are also known as Home Equity Conversion Mortgages (HECM) because they are insured under the Federal Housing Authority (FHA) program for reverse mortgages per very strict guidelines issued by the Department of Housing and Urban Development (HUD). The providers or lenders for reverse mortgages must be approved by the FHA before they can issue any HECM mortgages. The lenders may be banks, thrift and loan associations, mortgage companies, insurance companies or any other financial institution approved by the FHA.


3. The pros and cons of reverse mortgages.
Reverse Mortgage Pros
- Homeowners may permanently stay in their property.
- Homeowners do not make any monthly mortgage payments.
- Any existing mortgages are paid off.
- Very easy to qualify because credit scores and income verifications are not necessary.
- Homeowners can receive flexible payouts either on a monthly, lump sum, credit line basis or any combination thereof.
- Proceeds of the loan are not taxable.
- Interest rates are lower than traditional mortgages.
- Heirs will never owe more than the home is worth and they will receive any excess of value over the loan amount.

Reverse Mortgage Cons
- The up-front closing costs are high as compared to traditional loans due to FHA mortgage insurance and origination fees.
- Need based government assistance such as Medicaid may be affected.
- Borrowers are still responsible for property taxes, home repairs and homeowners insurance.


Summary
Although, Reverse Mortgage HECM loans are becoming somewhat popular, it is very important for seniors to understand the ramifications of these obligations. In this regard, HUD requires that prior to committing to a reverse mortgages with any lender, all borrowers must receive a HECM Reverse Mortgage Certification of Counseling from a licensed counselor per the guidelines established by HUD. The borrower must be informed about all of the other options available to them as well as the pros and cons of engaging in reverse mortgages.

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