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"Your Rights in Foreclosure”

February 13, 2012

Unfortunately, we continue to hear that people are still facing foreclosures as a result of the struggling economy.

Knowing the available options to those who find themselves in financial trouble involving their most important investment, their homes, can make all the difference in the world.

Making Home Affordable Program
The program allows up to 5 million homeowners to take advantage of lower interest rates by allowing them to refinance their mortgage and will assist another 4 million families by allowing them to modify their loan to bring monthly payments to a level they can afford.

The program is essentially split into two separate plans: Home Affordable Modification and Home Affordable Refinance.

Home Affordable Refinance
The refinancing option is available only for conforming loans owned or secured by Fannie Mae and Freddie Mac, so this will include most loans. The only loans not eligible are FHA, VA, and USDA loans. Those types of loans qualify for other assistance programs which would allow you to modify the loan so that you can retain ownership of your home.

Both Fannie Mae and Freddie Mac have 1-800 numbers to call and see if your loan qualifies (1-800-7FANNIE) and (1-800-FREDDIE).

Additional requirements are:

  1. The property must be owner occupied. (You must be living in the property.)
  2. The borrower must have sufficient income to support the new mortgage debt.
  3. The first mortgage cannot exceed 105% of the current market value of the property.
  4. You CANNOT be delinquent on your mortgage. You must be current.

Home Affordable Modification
The modification program may be an option for those who aren’t current on their mortgage.
To be eligible for the modification you must:

  1. The property must be owner occupied.
  2. Have an unpaid balance that is equal to or less than $729,750.
  3. Have a loan that originated before Jan. 1, 2009.
  4. Have a mortgage payment (including taxes, insurance, and homeowners association dues) that is more than 31% of the borrowers’ gross monthly income, and
  5. Have experienced a significant change in income or expenses to the point where you can no longer afford your mortgage.

You don’t have to be delinquent on your mortgage payments, but you can be.

Under this program, the modified interest rate is not permanent. If the modified rate is below the market rate it will be fixed for a minimum of five years. Beginning in the sixth year the rate may increase no more than one percentage point per year until the rate reaches the Freddie Mac Primary Mortgage Survey rate on the day the modification was originally executed. If the modified rate exceeds the survey rate, the rate for the remainder of the term is the modified rate.

Also keep in mind that this program IS NOT mandatory—it’s voluntary. The government does offer financial incentives to those lenders that will participate, however, and most are expected to participate. Those who participate sign an agreement with the Treasury in which they agree to review every potentially eligible borrower who calls or writes asking to be considered for the program.

As these contracts are signed, a list of those participating will be available online at www.FinancialStability.gov.

Who can I talk to in order to find out what my options are and how to apply for either of these programs?
First, always contact your lender to see what it would be willing to do.  You should also contact one of the housing counseling agencies approved by the Department of Housing and Urban Development (HUD) located throughout Allegheny County. A list of these agencies can be found on HUD’s website at www.hud.gov.

If you have legal questions, you can call the Allegheny County Bar Association’s Lawyer Referral Service at 412-261-5555.