A sad fact of the current economic climate is that many homeowners are struggling with their mortgage payments and are at risk of foreclosure if circumstances do not improve. A common approach to this kind of situation is ploughing on regardless in the vain hope that a miracle will occur. This inevitably leads to an unrecoverable situation and the property being lost.
However, there are alternatives if the problems are addressed early enough and the government offers several incentive schemes to help those experiencing difficulties.
For home owners who have managed to keep their job but are still struggling with the rising costs of essentials, a scheme called the Home Affordable Modification Program – HAMP – may be of use. The program allows mortgage repayments to be dropped to just 31% of gross income, with the typical reduction around 40%.
To be eligible for HAMP, a homeowner must meet several criteria set down by the scheme. Firstly, they must still be in employment with a salary that can be evidenced by documentation. The monthly mortgage repayment must total more than 31% of the gross income and the outstanding mortgage must be less than $729,750, with an inception date prior to 2 January 2009. The property must also be the main residence of the homeowner and there must be no convictions for a number of listed financial offenses such as fraud, larceny or money laundering within the last ten years.
For homeowners who would like to refinance to a more affordable mortgage but are stopped from doing so due to negative equity, there is another scheme which can help stabilize finances without jeopardizing the property.
The Home Affordable Refinance Program – HARP – is available to anyone who is not in arrears on their mortgage but the value of the property means a refinance deal is not accessible via a standard package.
HARP finance is essentially a new loan with more affordable terms which provides the homeowner with the ability to put the mortgage on a more stable footing in the longer term. The eligibility criteria stipulate that no payment must have been more than 30 days overdue in the previous 12 months and the outstanding mortgage balance is not more than 125% of the property`s market value. It is also underwritten to ensure the new level of repayments are sustainable and affordable and typical refinance fees will be applied.
Lenders can adapt the above criteria to accept applicants onto schemes and equally have the right to refuse homeowners even if all of the eligibility rules have been met.
Desperate times can lead to desperate measures and there are many scam artists out there waiting to take advantage of those at their most vulnerable. Any organisation promising to save a property from foreclosure, no matter how severe the debt should be viewed with caution, especially if a fee is requested upfront in return for the service. Common scams include asking the homeowner to sign over the deeds of the property to guarantee foreclosure prevention as well as insisting that the paperwork is signed on the spot. Other fraudsters offer to buy the property but for a rip-off price guaranteed to turn a handsome profit when sold on.
The best way to avoid defaulting on a mortgage in the first place is to ensure the deal taken out is the most competitive on the market and right for the circumstances. The best way to do this is do use a comparison website, such as performing a search for Mortgages at Moneysupermarket. This will provide a profile of the different packages on the market and the associated interest rates and costs.
