Making Homes Affordable (MHA) FAQs

Since March of this year, qualified homeowners have been able to renegotiate the terms of their mortgages through the Making Homes Affordable plan (MHA), a federally-subsidized program designed to check the foreclosure freefall by helping homeowners meet their monthly payments.
Not everyone will qualify, but for those who do—and the government’s hoping that 3 to 4 million do—$75 billion has been set aside to fund the program (and to provide banks a monetary incentive, good news for the borrower).

Here are some frequently asked questions to help you navigate this…

1. What is a loan modification?
This is a change in one or more of the terms of a home loan. Generally speaking, it allows the reinstatement of the loan and provides lower monthly payments. You may also hear it referred to as a mortgage modification, restructuring, or workout plan. Under Obama’s plan, the goal is to help the borrower reduce monthly payments to 31% of monthly income or lower.

2. How do I qualify?
The short answer is that you’ll need to show that modification will make the difference between your keeping the home and losing it. So you’ll need to prove financial hardship—loss of income and/or increase in expenses due to job loss or relocation, divorce or separation, death of spouse or other, illness, or even military service; and you’ll need to prove responsibility–proof of income, and a complete and accurate disclosure of your financial statement.

3. What are the restrictions?
Here are a few: Only those living in the home on which the loan is being paid are eligible. Mortgages on second homes, investment properties, commercial properties, and vacation homes are ineligible. The mortgage must have originated prior to 2009 and be no more than $729,750.

4. What is the procedure?
The bank will look at your monthly income and monthly loan payment. Under the MHA, borrowers can lower their payments to less than 31% of income. One or more of the loan’s terms may be adjusted to meet this. The new mortgage payment will then be in effect for five years.

5. Do I have to be currently delinquent on my payments to get a loan modification?
Not necessarily. One of the goals of the program is to help borrowers before they get into trouble. To that end there’s a provision and incentive which allows lenders to reach out to those homeowners who are not yet delinquent but deemed at risk.

6. Will a loan modification help me stop foreclosure?
Yes, it will. And that’s the program’s main goal. You’ll work with your lender to find a payment solution that halts the foreclosure and/or reinstates the loan.

7. Can my missed payments be added back into my new loan modification?
Yes. Arrears can be rolled into the new loan balance, making it current.

8. Can I do a loan modification myself or should I pay someone to represent me?
Before the MHA program came along the burden of getting a loan modified was largely on the borrower’s shoulders. But incentives for the lenders to get involved are making that less so. Still, it’s not a simple process. For what it’s worth, the Treasury Department is discouraging third-party, fee-based representatives. But the decision is yours. Either way, learn the process (you’re starting that now), think like a bank when putting together your materials, and know your legal rights.

9. How long will the MHA program be available?
Through the end of 2012.

10. So how do I get started?

Be informed, learn all you can, then contact your lender’s loss-mitigation department.

The Importance of a Housing Recovery

The Importance of a Housing Recovery for the Overall Economy and how it Affects Veteran Home Owners

The US stock market has acted like a roller coaster for the past week.  Down 500, then up 450 then down then up and then up again.  There is so much fueling this craziness that at times it is just down-right insanity.  In just under two weeks, we have seen Fannie and Freddie basically fail, Lehman Bros has gone bankrupt, the US treasury has pumped in hundreds of billions of dollars and who knows what will be next?

One thing almost everyone can agree on is that until we have a housing recovery, that this market will continue to suffer and bleed.  What is a housing recovery?  Eric Kandell of Flagship Financial says, "A true housing recovery will occur not when prices come back up, but when prospective buyers can actually get approved for mortgages again."  The major problem in a housing recovery right now, regardless of what the FED or anyone else does, is that good, solid home buyers CAN NOT seem to get approved for loans like they used to. 

If interest rates are back down to historical lows and housing prices have fallen by 40% in some areas, how are we still seeing so many people get denied for mortgage loans?  The problem is that for the past 3-5 yrs anyone could buy anything and that is why housing prices got so inflated.  You could have been a bag boy at a grocery store putting yourself through college with a part time job, but if your credit was just okay you could buy a million dollar home with ease.  Sure it sounds crazy, but it is the absolute truth.  So now that prices are pretty far down in comparison to the past two years, and interest rates are low, we should be out of the woods, correct?  The truth is that that is 100% false and this is what is the scariest thing buried in our market today.

There cannot be any real housing recovery any time soon.  Does that mean months, years, or more?  Mortgage insiders say it will be much longer than we expect.  "A ton of our prospective home buyers are being turned away and they have solid jobs, great credit, and even very little debt.  The reason they still can not get approved for a home is that the typical American home buyer does not have any money saved away.  It is not uncommon for our loan officers to find buyers with 700 Fico scores and high paying jobs, but absolutely no money to their name.  "Take a look at the credit report and the boat, the 3 cars and the time share will explain to you where the money went." Says Nate Burt of Flagship Financial. 

 Ever since FHA has discontinued its down payment assistance, there is only one type of buyer that can still buy a home with NO MONEY DOWN.  Some people may feel at first glance that this sort of financing has caused this real estate bubble and that we are doing our nation's veterans a disservice.  You must first understand the additional benefits of VA home loans before jumping to such a conclusion.  Veterans pay absolutely no mortgage insurance, unlike FHA and most conventional and even subprime loans (now extinct).  Veteran home loans also have a history of carrying lower than normal interest rates, making payments much more affordable.  The VA allows veterans to refinance as often as needed when rates go lower and to do so is normally very simple.

The housing market has a ways to go before we can consider things fixed, and the mortgage industry sure has a lot of changes to go through also, however this great Nation's military will play an important role in the recovery and LowVARates.com will do all they can to assist veterans in bringing to pass this recovery.

Veterans and active duty military along with the reserves and coast guard can still qualify for home loans with no money down and no money in the bank.  Deparment of Veterans Affairs has gone to great lengths to insure that our finest citizens have every opportunity to own a piece of the American Dream.  According to a representative from LowVARates.com, "veterans can have less than a 600 Fico score, have a debt ration over 50% and absolutely no money in the bank, and still be able to buy a very nice home at a very low fixed rate."