Posted: Friday, Nov. 21, 2008
One of the most ambitious mass-market "loan modification" programs was outlined Nov. 11 by the Federal Housing Finance Agency - overseer of Fannie Mae and Freddie Mac - along with the 33 banks and mortgage servicers who make up the private-sector Hope Now Alliance.
The program, which is scheduled to start nationwide Dec. 15, aims at thousands of subprime and other borrowers who are seriously behind on payments - three months or more - and are slipping fast toward foreclosure.
To be eligible for intervention, owners need to document that they can handle mortgage payments with up to 38 percent of their monthly gross income.
They also need to demonstrate that they have experienced some form of financial reversal that made them delinquent on their payments, and prove that they did not intentionally go into default just to get better terms.
If they can pass through these hoops, borrowers may qualify for sharply reduced interest rates, deferrals of principal payments or extended loan terms - whatever combination it takes to get them an affordable payment with their current income.
If homeowners can't connect directly, they can work through the Hope Now Alliance (www.hopenow.com or through the U.S. Department of Housing and Urban Development (www.hud.gov/foreclosure). Hope Now also has a toll-free hotline - 1-888-995-HOPE - staffed by counselors.
Bottom line for borrowers: Definitely pursue a loan modification if you qualify and need one. But talk with your servicer to make sure that the revised terms you're signing up for are realistic for your long-range economic situation, and not likely to be just a temporary patch.
