Health & Fitness
PART 2 - Upside Down on Your Mortgage: You May Have Options
In this piece, I briefly cover the options for homeowners who, for one reason or another, are having difficulty making their mortgage payments. Read on. You just might be pleasantly surprised.
Last week I talked about some of the situations that constitute “hardships” for homeowners who are in distress. I remind you that “distress” is now considered a blanket term for homeowners who, for one reason or another, are having a hard time keeping up with their mortgage payments. It is also important to note that foreclosure is a LAST RESORT for us all…and the banks agree! I repeat: the banks do NOT want to take our homes!
To go into complete detail about all of the alternatives to foreclosure would require me to write a book. Therefore, I will briefly cover the options here.
Home Affordable Modification Plan (“HAMP”)—The goal here is to modify the borrower’s first and/or second loan with a new interest rate and payment. The ultimate goal is to keep the borrower in the home, if desired. The borrower is required to provide specific information and documentation to the servicer of the loan. There are also some specific eligibility requirements, the most important of which is that the borrower’s property must be, or must have been, their primary residence.
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Home Affordable Foreclosure Alternatives (“HAFA”)—If the borrower either does not qualify, or chooses not to go forward with a HAMP, the servicer of the loan is required to analyze the borrower’s situation for a “Short Sale” or “Deed-In-Lieu (of foreclosure)."
One of the benefits of the HAFA program for the borrower is that the first lien debt is FORGIVEN whereas previously the borrower could be faced with a “deficiency judgement” which roughly translates to REPAYMENT. Additionally, if the second lien holder agrees to accept the offer, this debt will also be forgiven.
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The HAFA program also provides for a $3,000 relocation benefit paid directly to the borrower at the close of the short sale transaction. And one of the most attractive benefits is that borrowers may be able to buy a home again by re-establishing a credit history as soon as 2 YEARS after the Short Sale (versus 7 years after foreclosure).
Whether HAMP or HAFA is the ideal program for the borrower, the processes have been standardized and the timeline is far more attractive than it has been in recent years (and months).
