Can't Pay the Mortgage? Struggling Borrower Options

by Vince in Los Altos, CA, by S.K in Phoenix, AZ, and by Dion in Crestwood, IL

Can't afford to pay your mortgage? While low interest rates of 2015 are assisting mortgage affordability, results of the recent recession continue to plague thousands of homeowners. If paying for your home has become a challenge, learn your options in my answers to the following homeowners. Meet Vince who is concerned his HAMP modification payment will go up, S.K., a veteran forced into medical retirement, and Dion who is drowning in a mortgage payment.


Are Lenders Required to Follow Making Home Affordable Guidelines

By Vince S in Los Altos, California
Are Lenders Required to Follow Making Home Affordable Guidelines

Kate,

After seven applications and two years, I was finally approved for Making Home Affordable's loan modification and told that my three month trial payments would be at 3.25%.

My current loan is at 2.75%.

I thought that the guidelines required the lender to first try lowering the interest rate (in 1/4% steps) until either the target rate (31% of computed monthly income) was reached or 2%, whichever comes first. If the loan is lowered to 2% and the target rate is still not met, then the amortization is increased until the target rate is met.

So my first question is: Can they raise the interest rate? (That doesn't sound like it is making homes more affordable.)

My second question is: Will they recalculate the loan terms before they give me their final, take it or leave it, loan terms?

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Are Lenders Required to Follow Making Home Affordable Guidelines

Hi Vince,

Lenders participating in the various Making Home Affordable Programs, the two most common being HARP 2 Refinance and HAMP Tier 2 Modification, are required to adhere to the program guidelines.

Mortgage Lender Program Overlays

Unfortunately, individual lenders are allowed to add their own requirements on top of the guidelines for many programs, making it even more difficult for borrowers to obtain loan approval. These additional guidelines are called Lender Overlays. Read more at HARP 2 Program Guidelines vs Infuriating Lender Overlays.
Because I have heard of varying modification terms from homeowners, I hesitate to say that the HAMP interest rate will always, without question, adjust upward at some point. That being said, I do believe the majority of HAMP loan payments will increase over time. However, I would urge anyone contemplating a modification to take the time (and set aside desperation) to carefully study the terms which the loan servicer is required to provide in writing.

Stay on Your Toes During Mortgage Modification Trial Period

My answer to your second question is based on what I hear from other homeowners in similar situations. Until you have a final offer in writing, I would be on the alert for changes during the trial period. So open any correspondence that comes in the mail and read it carefully, perusing for alterations to the initial offer.

Getting a Loan Modification? Buyer Beware!

I wish I could be more reassuring, Vince, but the modification process is a Buyer Beware scenario. Read more at HAMP Loan Modification Scheme Exposed.

Best wishes,

Ask Kate

Mortgage No Longer Affordable After Medical Retirement

By S.K in Phoenix, Arizona
Mortgage No Longer Affordable After Medical Retirement

Kate,

I am a 64 year old single veteran and have been told that I have to medically retire.

I have a condo that has a second mortgage which I have defaulted on.

I cannot afford my condo on retirement income. I am going to live with my daughter and son in law.

What do I do about my Condo? Should I call the bank, try to sell it or file bankruptcy? I don't want to be sued or something.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Mortgage No Longer Affordable After Medical Retirement

Hi S.K,

If you do not want to continue living in your home as your personal residence, there are several options to help avoid mortgage foreclosure...
  1. Loan Modification: Call your loan servicer for a HAMP loan modification which is now allowed on rental properties. Then rent out your home until such time that you want to sell it or move back into it. Read more at Underwater Real Estate Investor Loans.

  2. Short Sale: Even if you owe more than your home is worth, call your loan servicer to ask how to sell your home and not be held liable for a deficiency judgement. Read more at Choosing Short Sale Over Foreclosure.

  3. Deed in Lieu of Foreclosure: Less harmful to your credit scores, deed in lieu of foreclosure is a voluntary action on your part. Depending on which investor backs your mortgage, you may be eligible for a program, Cash for Keys, which subsidizes your moving expense. Read more at Deed-in-Lieu of Foreclosure - HAFA Assistance and Is HAFA Relocation Assistance Program Irresponsible.
Lastly, read what I told George, whose wife was very ill, at When Home Affordable Modification Program Says No.

Best wishes,

Ask Kate

Can't Afford to Pay the Mortgage... How Do I Keep from Drowning

By Dion J. in Crestwood, Illinois
Can't Afford to Pay the Mortgage... How Do I Keep from Drowning

Hi Kate,

I purchased a condo over 10 year ago for $70K. Since that time I took out a second mortgage and my association fees have increased.

Right now my mortgage is about $600 (6.5%), second mortgage is $352 (8%) and the association fees are $250 monthly.

I AM DROWNING!

I tried to use some of the government programs to reduce my monthly housing expenses but found out I do not have a loan owned by Fannie Mae or Freddie Mac.

Last year, an owner in my building foreclosed and his unit was sold for less than $30K. I feel that drastically hurts my chances of refinancing.

Nothing has changed with my income, so I cannot file a hardship claim. While I understand my poor decisions have landed me in this mess, I would like some advice on all of my options to get me through this awful situation.

Ask Kate at Get-Your-Best-Mortgage-Rate.com
Ask Kate answers: Can't Afford to Pay the Mortgage... How Do I Keep from Drowning

Hi Dion,

This month, there is a HOPE NOW homeowner event in Chicago, IL being hosted at the Olive-Harvey College Gymnasium. If you can make the trip, I would encourage you to attend.

HOPE NOW is a collaboration between housing advocates, mortgage companies, investors such as Fannie Mae, and the government, to prevent foreclosure and strengthen homeownership by offering options to struggling borrowers.

The event takes place from 2:00 pm to 8:00 pm at 10001 South Woodlawn Ave., Chicago, IL 60628. For more information on the event, call the Homeowner's HOPE hotline, staffed by HUD-approved credit counselors, at 888-995-4673.

To make the most of your time at the HOPE NOW event, you should bring along a bit of paperwork. Find the list on the following page under this heading: Before Calling the Housing Experts....

Best wishes,

Ask Kate

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