Government Help to Stop Foreclosure

It is possible to get government help to stop foreclosure proceedings. Programs are available to homeowners to help them lower their monthly payments to a manageable level.

Homeowners can avoid the foreclosure process.

Finding Government Help to Stop Foreclosure

The Department of Housing and Urban Development (HUD) provides information and training to homeowners, real estate professionals and lenders about home purchase, mortgage financing, down payment assistance and foreclosure avoidance. The information is provided through online information, brochures, events and formal training sessions. Trainees from HUD seminars go on to provide the information to additional homeowners through non-profit counseling agencies.

In early 2009 additional programs were implemented as part of the federal actions to support the recovery of the failing mortgage market and to decrease the rate of foreclosures.

Foreclosure Avoidance Counseling

HUD has certified housing counseling agencies throughout the nation with counselors who are specially-trained to work with homeowners who are trying to avoid foreclosure. The counselor can help the homeowner evaluate their financial situation and determine what the homeowner can afford to pay for a home.

Counselors understand the features and qualifications of various programs offered by lenders and can provide homeowners with tips and ideas on the steps they need to take to avoid foreclosure.

These counseling services are provided at no charge by nonprofit agencies.

Project Lifeline

This federal program is designed to encourage delinquent homeowners and lenders to work together to delay or alleviate foreclosure. Homeowners work with the lenders to catch up on late payments and possibly modify the loan to lower the monthly payments.

The Project Lifeline program process includes a series of steps:

• The lender sends a letter to each of their mortgage customers who are at least 90 days past due on their mortgage.
• The homeowner is asked to call the lender within ten days if they want to avoid foreclosure.
• The homeowner provides detailed financial information to the lender.
• The lender reviews the financial information and the status of the loan and then recommends:
  • Financial counseling - The homeowner may be asked to participate in financial counseling through a HUD-certified counseling agency.
  • A workout – The borrower is asked to pay a little extra each month to pay the delinquents payments on the loan.
  • A modification – The interest rate or the term of the loan are changed to provide a lower monthly payment for the homeowner.

The Project Lifeline process is also available to homeowners who are only 30 days or 60 days past due on their mortgage.

Six of the largest home lenders have agreed to participate in the program:

• Countrywide
• Bank of America
• CitiMortgage
• Washington Mutual
• Chase Home Finance
• Wells Fargo

Making Home Affordable Program

Many homeowners are trying to pay their mortgage; however, due to job loss or rising mortgage interest rates, they are not able to make their monthly mortgage payments. Due to falling home values, a homeowner may be unable to refinance their mortgage to a lower interest rate if they owe more than 80 percent of the current market value of the home.

The Making Home Affordable program is designed to get homeowners and lenders working together to find a way for the homeowner to avoid foreclosure. Participants in the program attempt to either modify or refinance their loan to lower the monthly payments.

Loan Modification

With loan modification the terms of the loan, such as the term of the loan and the interest rate, are changed to lower the monthly mortgage payment to a level that does not exceed 31 percent of the homeowner's income. Here's how it works:

• The lender reduces the monthly payments to a level where they do not exceed 38 percent of the homeowner's income.
• The federal government provides funds to the lender so that the monthly payment can be further reduced to not exceed 31 percent of the homeowner's income.

Homeowners do not have to be in default with their mortgage to take advantage of loan modification. The status of their loan can be:

• Current
• At risk of default
• Behind in the mortgage payments
• In the foreclosure process

The terms of the loan can be modified to lower the monthly payment. For example, the lender might reamortize the loan and possibly lower the interest rate:

• Reamortize the loan – The lender would add any delinquency or unpaid payments to the total amount of the unpaid mortgage. The length of the loan would be extended, spreading the unpaid mortgage over the longer term. For example, if a homeowner was $5,000 behind in their payments and had 20 more years to pay on the mortgage, the lender could add the $5,000 to the mortgage balance and spread the total over a 30-year period. The homeowner would be paying less money each month over the remaining thirty years then they had been paying on the loan when it only had twenty more years left until it was paid off.
• Lower the interest rate – The lender would lower the interest rate, which would lower the monthly payment.

You may qualify for a loan modification if you meet the following qualifications:

• You are the owner of the home
• The home is your primary residence
• The home is not a second home, vacation property, vacant home or an investment property
• The unpaid balance on the mortgage is $729,750 or less
• You can verify your sources of income
• You can provide copies of your recent tax returns
• You are willing to sign an affidavit of your financial hardship
• You are willing to enter a HUD-certified consumer debt counseling program

Mortgage Refinance

Some homeowners are able to make their monthly mortgage payments; however, they want to refinance their mortgage to a lower interest rate. If the value of the home has fallen, they may not have enough equity in the home for a lender to be willing refinance the loan.

If your mortgage is owned or guaranteed by Fannie Mae or Freddie Mac, you might qualify to refinance your mortgage to a lower interest rate loan. The new mortgage can be on your primary residence, second home or investment property and it can be either a fixed or adjustable rate loan. Your lender or loan servicer can tell you whether your mortgage is owned or guaranteed by Fannie Mae or Freddie Mac.

To qualify for a refinance through Fannie Mae or Freddie Mac, you must:

• Owe no more on the first mortgage than 105 percent of the property's current value
• Be current on your mortgage

Talk to Your Lender

You should contact your lender, loan servicer or a HUD-certified non-profit counseling agency as soon as you realize that you are not able to make your mortgage payment on time. They will be able to work with you to determine the best plan to lower your monthly payments and show you where to turn for government help to stop foreclosure.

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• FHA Loan Guidelines
• Amortization Table

• FHA Mortgages and Home Inspection Requirements
• Help for Single Moms to Buy a House
• Escrow
• FHA Debt to Income Guidelines
• Free Home Inspection Forms

• FHA Mortgages
• Category:About Mortgages
• Refinance While House Is in Foreclosure
• Mortgage Foreclosure Process
• HUD Foreclosures