If you have difficulties making your mortgage payment there are some remedies and things are getting better. This articles describes the "waterfall" of choices from the new HARP 2.0 to the HAMP and finally to HAFA. Everyone is not covered yet. HARP only covers Fannie Mae and Freddie Mac Loans. FHA has a new program coming out April 2012. It does seen that each couple of months a new program comes out to assist homeowners and the banks are becoming more reasonable and friendly in their approach to underwater and delinquent homeowners. Here is the basis flow.
HARP 2.0 - The Home Affordable Refinance Program provides refinance opportunities to borrowers with existing Fannie Mae and Freddie Mac loans who have demonstrated an acceptable payment history but have been unable to refinance to obtain a lower payment or more stable product. The loan must have been delivered to Fannie Mae or Freddie Mac prior to June 1, 2009.
Loan Purpose - rate and term refinance only
Loan to Value - Unlimited for owner occupied and second homes
105% for investment homes
Payment History - No mortgage late payments within the past 6 months and only 1 30 day delinquent in the past year - note: this will vary slightly from lender to lender
HAMP - Home Affordable Modification Program gives incentives and guidelines for mortgage servicers to modify existing mortgages. Homeowners that are delinquent with their mortgage payment, or do not meet the criteria of HARP can apply for the HAMP. HAMP involves mortgages loan servicers modifying the terms and conditions of first lien mortgages.The basic guidelines:
Owner occupied.
Loan Limits: 1 Unit $729,750 2 Units $934,200 3 Units $1,129,250 4 Units $1,403,400
Loan must have originated prior to January 1, 2009
Monthly mortgage payment (everything - taxes, etc) of greater than 31% of gross income
Financial hardship that can be documented
HAFA Home Affordable Foreclosure Alternatives Program provides two alternatives to foreclosure; deed-in-lieu of foreclosure and Short Sales.
In the deed in lieu of foreclosure, the property owner gives the property to the lender voluntarily in exchange for the lender canceling the loan. The lender may or may not forgive a deficiency balance.
Short Sale - The lender agrees to accept less than the balance owed on the mortgage at sale. The deficiency balance is typically forgiven.
The mortgage loan servicer must consider the homeowner for HAMP and HARP before allowing the HAFA program.
- Lenders that participate in HAFA waive the right to a deficiency judgment. Junior lenders can receive up to 6% of the loan balance or $6,000 maximum to release the loan. As of Feb 1, 2011, the 6% cap has been removed by the U.S. Treasury.
- Sellers will receive a government payment of $3,000 at close of escrow to cover relocation expenses.
- Sellers will not be required to make a seller contribution.
- Lenders must agree not to foreclose during the short sale process.
- With the exception of Fannie Mae, Freddie Mac, VA and FHA loans, the sellers' mortgage payment does not need to exceed the 31% ratio after 2/1/11.
I hope this helps explain the options and allow you can see the flow of activity. Try first to qualify for a new mortgage under the HARP then if that cannot be approved the next step may be the HAMP and finally the HAFA. The last two things to consider is (1) negotiate so that there is no deficiency balance and (2) negotiate so that you are not given a 1099 showing income to you for the shortage. Recently laws have changed in California to protect those who lose their homes for any reason but you will want to sit with an attorney and/or CPA to make sure that a deficiency or a large 1099 tax income statement do not cause future problems. There are a lot of options today and I hope this information helps.
Doug Jones
Mortgage Magic NMLS 286668
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