Government help for those underwater on 2nd mortgage

So now homeowners that are having trouble paying their second mortgage can be eligible for possible modification.  I was a little unsure of this initially, thinking about all the people who are struggling with paying their first mortgage.  I was wondering, “Why are we worried about those with two?”  But it makes sense.  Homeowners who are trying to get modifications on their first mortgages that have two mortgages are the ones having the most trouble.  Many lenders won’t do modifications or take losses on the loans of their first mortgage unless the second lien-holder does, too.  And because second mortgages usually are for a much smaller loan amount, homeowners are able to keep up with those payments. And that’s where this plan coms into play. 

Here’s what the Obama administration is introducing.  It’s called 2MP.  Currently it’s only available to those whose second loan originated on or before January 1, 2009.  Anything originated after that is not currently eligible.  And the first mortgage needs to be modified under the Federal program.  If the lender or lien-holder on the second mortgage is also participating in that program, they have to offer to modify the second mortgage.  They’re required to defer the payment of the same proportion of the principal that was deferred on the first loan.

Right now the program is expected to help about 1.5 million homeowners.  So far Bank of America, Wells Fargo, Citigroup, and JP Morgan Chase participate.  Bank of America recently started sending letters to home equity customers introducing this possible modification.

My concern is that it’s still too difficult to work out.  I understand and appreciate what the government is trying to do.  The banks are taking their sweet time approving these modifications, making it extremely difficult for customers to get them done on their own.  With the amount of time it takes to connect to someone, fill out paperwork, and hear back, it’s almost like a part-time job.  I’ve had clients say they’ve had to submit paperwork multiple times to their lender and still haven’t heard back.  It’s worth it to lower payments if you have the time and perseverance to wait.  It also may be worth it to you to talk to a company that offers to assist with loan modifications on your behalf.

More information on this new program can be found here. And I can be found on my Web site.

Help for those struggling with their mortgage

mortgagehelpFinancial expert Suze Orman appeared on Oprah Winfrey’s talk show yesterday and offered advice to those struggling through this recession.  I want to talk mostly about those that need help with their mortgage, but I will also write about her other suggestions to survive during this recession.

If you’re having trouble paying your mortgage, your first step is to find out if your loan is backed by Fannie Mae or Freddie Mac.  Currently, these lenders are offering loan modification programs and homeowner assistance to those having trouble paying.  Here is their contact information:

For Fannie Mae:
800-7FANNIE (8 a.m. to 8 p.m. EST)
www.fanniemae.com/homeaffordable

For Freddie Mac:
800-FREDDIE (8 a.m. to 8 p.m. EST)
www.freddiemac.com/avoidforeclosure

The government has also created a Web site to determine if you are eligible for assistance.  You can take their self-assessment tool to find out. 

Suze’s other helpful tips include to live on half of your income.  If you’re a dual-earner household, she suggests banking one contributor’s salary and using the rest to live off of.  If you’re a single-earner household, cut your income in half.  If you suddenly find yourself unemployed, your income will be down to that amount anyway, so now is the best time to figure out where and how you can cut your spending.  She offers this worksheet to help you determine how you can cut your spending.

She’s also urging people to save their cash. She recommends only paying the minimum on your credit card each month.  As soon as you pay off your balance you could find your credit card closed and then you’ll really be in trouble.  Use extra money you have to put away for an emergency fund.  And do your best to pay for things in cash or with a debit card.  Try to avoid using your credit card since interest rates are skyrocketing.

20090311-tows-suze-orman-step-3-homes-290x218

Take advantage of the stimulus package.  The government is still offering an $8,000 tax incentive for first time buyers.  That means if you qualify to purchase a home under this program that if you owe $10,000 in taxes, you’ll only pay $2,000.  It’s an $8,000 tax credit!  The government is also offering tax credits to those in the market to purchase a new car.  Click here to find out if you qualify.

For more questions on the stimulus package, to find out if you’re eligible for mortgage loan modification, or questions about the first time buyer tax incentive, please visit me online.