Anticipating a flood of requests from troubled borrowers hoping to participate in the Obama administration’s plan to modify or refinance up to 9 million loans, the HOPE NOW coalition of mortgage servicers is taking applications for assistance online.
Troubled borrowers can now apply for help from their mortgage servicer by submitting details about their financial situation at HopeNow.com, the Web site operated by the alliance of mortgage servicers and nonprofit counselors.
The online application form supplements the existing HOPE NOW hotline, (888) 995-4673, and servicers are promising to respond to applications within five to seven business days to confirm the process has begun.
The Obama administration announced its two-pronged "Making Home Affordable" program March 4. One component of the program, the "Home Affordable Modification Program," will provide $75 billion in incentives aimed at helping up to 4 million homeowners negotiate loan modifications or short sales with their loan servicers.
The other component of the program, the "Home Affordable Refinance Program," is an initiative to refinance up to 5 million loans owned or guaranteed by Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac have set up Web sites and toll-free hotlines to help borrowers determine whether their existing loan is owned or guaranteed by Fannie or Freddie.
The Fannie Mae form is at www.fanniemae.com/homeaffordable, and the company accepting calls at (800) 732-6643. Freddie Mac’s Web site for troubled borrowers is www.freddiemac.com/avoidforeclosure and calls are accepted at (800) 373-3343.
The administration’s new refinancing program is aimed at borrowers who took out loans owned or guaranteed by Fannie and Freddie who have seen the equity they hold in their homes fall below 20 percent. Only borrowers who have sufficient income to support a new loan on a primary residence with a loan-to-value ratio that does not exceed 105 percent are eligible.
To be eligible for a "Home Affordable" modification, borrowers must be the owner-occupants of a one- to four-unit property, have an unpaid principal balance that does not exceed $729,750 (for a one-unit property — the limits are higher for two- to four-unit properties), and a loan originated before Jan. 1, 2009.
Eligible borrowers may still be current on their loans, but must have experienced "a significant change in income or expenses" that makes their current mortgage payment more than 31 percent of gross monthly income.
The program offers incentives to lenders and borrowers to get payments back to the 31 percent debt-to-income ratio. In cases where an evaluation determines a loan workout is less costly than foreclosure, lenders may reduce interest rates to as little as 2 percent and extend loan terms up to 40 years.
If those steps aren’t enough to make monthly payments, participating lenders must reduce loan principal to achieve that goal, with the government sharing in the cost of providing such relief.
The plan also offers incentives for servicers to approve short sales or accept deeds in lieu of foreclosure.
Loan servicers are eligible for $500 incentive payments and can be reimbursed up to $1,000 when they extinguish other liens. Borrowers who pursue short sales or deeds-in-lieu of foreclosure can receive $1,500 for relocation expenses.
More information on both programs is available at www.FinancialStability.gov.
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