Federal programs aimed at keeping people in their homes

Despite efforts to the contrary, there still is a major gap between homeowners in danger of losing their homes and the resources available to help them avoid foreclosure.

A study in Nevada found that more than half facing foreclosure didn't know about federal and state programs aimed at helping them. Furthermore, almost as many said their lenders were "not willing at all" to work with them.So if troubled Nevada owners aren't getting the message that help is available, it's a safe bet to assume that neither are owners in other states.

With that in mind, here is a quick rundown of the federal programs aimed at keeping people in their homes.

Under the broad Making Home Affordable initiative, Uncle Sam offers several options to owners — but not to investors — including the Home Affordable Refinancing Program (HARP) and the Home Affordable Modification Program (HAMP).

If you are on time with your payments but cannot take advantage of today's lower interest rates because you owe more than your home is currently worth, HARP can help if either Fannie Mae or Freddie Mac holds your loan; the two mortgage giants touch perhaps half of all loans.

If you are struggling to make your payments because your income has been curtailed or your interest rate has increased, you may be eligible to have the terms of your loan changed under HAMP. The amount you owe must be less than $729,250, your loan must have been taken out before Jan. 1, 2009, and your total monthly housing outlay — principal, interest, taxes, insurance and homeowner-association dues — must be more than 31% of your current gross earnings.

For owners who are having a tough time making their house payments because they have a second mortgage, the Second Lien Modification Program (2MP) offers a way to lower the payments on the junior loan when the primary mortgage is modified under HAMP.

Under 2MP, which is meant to be complementary to HAMP and is somewhat more complicated than the other alternatives, the owner of the second lien and the company administering the loan on the lien owner's behalf are given monetary incentives to reduce your rate, extend the term or possibly even extinguish the loan altogether.

If you can no longer afford your home but want to exit gracefully and avoid the negative effects of foreclosure, the Home Affordable Foreclosure Alternatives (HAFA) program offers up to a $3,000 cash stipend to help you transition into more affordable housing. To qualify, you cannot be eligible for a trial loan modification, fail to complete a successful trial mod or miss two consecutive payments during the trial-mod period.

HAFA is designed to streamline two popular options to foreclosure, a short sale and a deed-in-lieu. With a short sale, the loan servicer allows you to sell the property for less than what is owed. With a deed in lieu of foreclosure, you voluntarily transfer ownership to the servicer with the understanding that foreclosure proceedings will be dropped.

If you are considering a short sale, work only with a real estate agent who has short-sale experience. These deals are so tricky and time-consuming that only a professional who has done several of them will do. If your agent claims to know what he or she is doing, ask for references from several satisfied customers just to make sure.

Mortgage servicers who participate in the Making Home Affordable program are required to evaluate your eligibility for a loan modification before looking at your other options. If you request a mod and are determined to be mod-worthy, you will enter a trial period.

Modification possibilities include lowering your interest rate, extending the term of your loan, allowing you to skip several payments or even reducing the balance owed.

If you don't qualify for any of the above options, your servicer will evaluate your situation for possible inclusion in proprietary programs. HOPE Now, a private, voluntary alliance of servicers, investors, insurers and nonprofit counselors, says its members completed twice as many loan modifications under their own programs as under the government's.

If any of these possibilities seem as if they even remotely apply to your situation, nose around the government's Making Home Affordable website at http://www.makinghomeaffordable.gov.

It's also a good idea to consult with a local housing counseling agency that can help you wind your way through the maze you are about to enter. Such an agency usually charges a minimal fee — or nothing at all — so stay away from anyone who wants money from you in advance, pressures you to sign the house over to him or her or tells you to make a payment to anyone other than your lender.

Counselors also will have their fingers on state and local initiatives to help citizens stave off foreclosure.

For a list of government-approved agencies, visit the Department of Housing and Urban Development's website at http://www.hud.gov or call (800) 569-4287 to be connected to HUD's interactive voice system. A few other good resources are the National Foundation for Credit Counseling at http://www.nfcc.org; NeighborWorks America, http://www.nw.org, a leader in affordable housing and community development; and the Consumer Credit Counseling Service of Greater Atlanta, http://www.credability.org, a nonprofit with a local name but a national footprint.
- Lew Sichelman, LA Times

Home Affordable Foreclosure Alternatives Program Update

The Home Affordable Foreclosure Alternatives (HAFA) Program, a part of the HAMP program, provides additional options to avoid costly foreclosures and offers incentives to borrowers, servicers and investors who utilize a short sale or deed-in-lieu (DIL) to avoid foreclosures. HAFA alternatives are available to all HAMP-eligible borrowers who: 1) do not qualify for a Trial Period Plan; 2) do not successfully complete a Trial Period Plan; 3) miss at least two consecutive payment during a HAMP modification; or, 4) request a short sale or deed-in-lieu.

HAFA has been revised effective April 5th, 2010 in Supplemental Directive 09-09, replacing original Supplemental Directive 09-01.

In a short sale, the servicer allows the borrower to list and sell the mortgaged property with the understanding that the net proceeds from the sale may be less than the total amount due on the first mortgage. Generally, if the borrower makes a good faith effort to sell the property but is not successful, a servicer may consider a DIL. With a DIL, the borrower voluntarily transfers ownership of the property to the servicer - provided title is free and clear of mortgages, liens and encumbrances. With either the HAFA short sale or DIL, the servicer may not require a cash contribution or promissory note from the borrower and must forfeit the ability to pursue a deficiency judgment against the borrower.

HAFA simplifies and streamlines the short sale and DIL process by providing a standard process flow, minimum performance timeframes and standard documentation. A loan must be HAMP eligible and meet other requirements to be eligible for incentive compensation. Among the requirements: The property must be borrower's principal residence and the loan was originated on or before January 1,2009. The program sunsets December 31, 2012.

The borrower may receive a one-time payment of $3,000 in the month the Short Sale/DIL Loan Set Up transaction is received after the closing has occurred.

The guidelines for HAFA are detailed further in the documents found here:

https://www.hmpadmin.com/portal/programs/foreclosure_alternatives.html

https://www.hmpadmin.com/portal/docs/hafa/sd0909r.pdf