Facing Foreclosure?

If you’re behind on your mortgage payments, you’re not alone. Foreclosure has become an all-too-common problem in today’s difficult economy. On Tuesday night, a free mortgage intervention clinic at City Hall outlined the many options and resources available to those facing foreclosure.

Attorney Jeff Gentes of the Connecticut Fair Housing Center shared free legal advice with an audience of people from Meriden, Waterbury and New Haven. He started off by telling participants: “I can tell you that you are not alone in being in this situation.”

Gentes counsels about 100 people facing foreclosure each month in his twice-monthly free legal clinics. About 11,500 people are in foreclosure mediation right now in Connecticut, he said. The website www.foreclosure.com lists 147 homes in Meriden currently in foreclosure.

The attorney advised attendees to:

• Work with a HUD- and CHA-certified housing counselor, available at the Neighborhood Housing Services of New Haven at www.nhsofnewhaven.org.
• Beware of scams. “Anyone who asks for money to help you, unless it’s a local attorney, don’t pay them,” Gentes warns.
• Get into the mediation program. In mediation, you, the lender and a mediator work together to try to resolve the situation. Gentes revealed that 65% of those who participate in mediation keep their homes. You can’t apply for mediation until the foreclosure process officially begins.
• Before each mediation session (there will be about five over the course of several months), prepare a 30-second story telling: 1)how you ended up behind on your mortgage payments, 2) how you hope to resolve the situation, and 3) the steps you have taken to address the problem, such as applying for a loan modification.
• Keep notes of everything you do. Record the date, time and content of all phone calls. Make copies of all documentation you send. Bring this information to each mediation session.

Gentes informed the audience that free legal advice is available at the New Haven Courthouse every Wednesday from 9 to 11 a.m. He also handed out a comprehensive guidebook that contains forms, guidelines, websites and other valuable information for individuals going through foreclosure. An electronic version of the guide is available at www.ctfairhousing.org.

In addition to Gentes’ legal advice, Michael Haynes, a housing counselor with Neighborhood Housing Services of New Haven, gave an overview of the options and resources available to those facing default on their home loans. Those options might include:

Repayment Plan—The lender allows you to pay back the amount that is overdue in monthly installments. This option works for those whose financial crisis has passed and can now make larger mortgage payments.

Forbearance—The lender agrees to let you stop or reduce your payments for a set period of time until your financial crisis passes and you can resume payment. This option is designed to help those whose financial difficulties are temporary.

Modification—The lender agrees to permanently change terms of the loan, such as the interest rate, the maturity date or the unpaid balance.

Partial Claim (for FHA loans) or Advance Claim (for loans with private mortgage insurance)—An investor or mortgage insurance company lends you the money to make your mortgage current. You are expected to pay the lien back when you sell, refinance or pay off your mortgage. This option works for those whose financial hardship has passed and can now make their mortgage payments, but don’t have enough savings to cover the overdue amount.

Refinance—You get a new loan with different terms to pay off your old mortgage.

Chapter 13 Bankruptcy—This form of bankruptcy puts a foreclosure on hold while you rearrange your financial affairs. The foreclosure resumes when the bankruptcy period ends. “I would advise you to use this as a last, last, last resort, if at all,” Haynes stressed.

Short Sale—You sell your home for less than the amount owed on your mortgage. The lender accepts the proceeds of the sale and forgives the remainder of the debt. This option is often used when your household income is permanently reduced, as in a divorce.

Deed in Lieu of Foreclosure—You hand over the title of the property to the lender, who agrees to forgive the delinquent debt. This often happens after the homeowner has tried but failed to sell the home.

Reverse Mortgage—This option, for borrowers aged 62 or older with at least 50% equity in their homes, allows you to receive payments or stop making payments and keep the title to your property.

Haynes also detailed some specific state and federal programs available to those facing default.

State-Run Programs

CT FAMLIES (Connecticut Fair Alternative Mortgage Lending Initiative and Education Services) is a mortgage loan refinance program that can help you get a lower 30-year, fixed-rate mortgage. As a rule of thumb, if you currently have a mortgage with a fixed rate of 4.5% or less, you probably won’t benefit from this option.

EMAP (Emergency Mortgage Assistance Program) is designed to help those who have fallen behind on their mortgage payments due to a temporary financial hardship. It provides a loan to help you keep your mortgage current. Interest doesn’t begin to accrue on that loan until it’s time to start paying it back—up to five years in the future.

Both of these programs are run by the CHFA (Connecticut Housing Finance Authority). For more information, visit www.chfa.org or call (887) 571-2432.

Federal Programs

HARP (Home Affordable Refinance Program) is a mortgage refinancing option for those who are up to date on their mortgage payments or have been no more than 30 days delinquent in the past year and whose mortgage is not more than 125% of the home’s current market value. The interest rate on the mortgage loan will be adjusted so that the payment is no more than 31% of your monthly income.

HAMP (Home Affordable Modification Program) is a loan modification program for those whose mortgage payment exceeds 31% of gross income.

Both of these programs are available through the Making Home Affordable (MHA) program and can be used only with mortgages owned or guaranteed by Freddie Mac or Fannie Mae. For information on these options, visit www.makinghomeaffordable.gov.

HAFA (Home Affordable Foreclosure Alternative) is a program for short sales where the lender considers an offer for less than what you owe, forgives the rest of the debt, and gives you $3,000.

“Before you leave here tonight,” Haynes told attendees, “at least you’ll know what’s realistic and what is available to you.”