Bankruptcy Questions Answered

New Mortgage Help Announced

Americans struggling against underwater mortgages and those who have lost their jobs may have new government-sponsored ways to stay in their homes and keep up with mortgage payments. Here’s an outline of two new programs, and what they may mean for you:

Help With Underwater Mortgages

If you owe more on a mortgage than the home’s current market value, you’re “underwater.” It can be a scary place, but there may be a way out.

• If you’re current on payments: Assuming you haven’t missed any mortgage payments, you may qualify for a mortgage loan backed by the Federal Housing Administration (FHA) which may help you reduce your monthly payments and the amount you owe. In order to do this, you need to meet regular guidelines for FHA loans, and you need to owe more than 115 percent of your home’s current market value. If you qualify, your debt can be written down so that you owe no more than 115 percent of the home’s worth and your payments do not exceed 31 percent of your income.
• If you’re behind on payments: Borrowers who are 60 days or more late on their mortgages may benefit from a new provision of the Home Affordable Modification Program that allows lenders to reduce a loan’s principal. So, if your lender is participating in HAMP, your loan may qualify to be decreased and/or have its interest rate lowered.

Mortgage Help for the Unemployed

If you’ve lost your job recently and are beginning to worry about making payments on your house, you may qualify to have your payments temporarily lowered or eliminated. Here’s how:

• If you receive unemployment: In order to get this benefit, you must be receiving unemployment pay from the government and be able to prove that you are.
• And if you meet the criteria for HAMP loans: In order to take advantage of this program, you must live in the house as a primary residence, owe mortgage payments that exceed 31 percent of your paycheck, owe less than $729,750 on your mortgage, and demonstrate financial hardship, such as being job loss.
• You get a temporary reduction: If you qualify, you will have a three-month period in which you are only required to pay 31 percent of your income toward your mortgage. After that period, you can initiate a review to extend the program for another three months.

The benefit for homeowners is clear, but lenders may benefit from the program as well. It seems that borrowers who owe more than 115 percent of their home’s value are the ones most likely to walk away from their mortgages or file bankruptcy, leaving the banks with nothing.