On March 26, 2010 the Obama Administration announced several different modifications to the Making Home Affordable Program. One of these was designed to help those unemployed homeowners save their homes from foreclosure.
In the economic downturn that has hit the United States, many homeowners have lost their jobs. Their only ongoing income was Unemployment Insurance benefits. Typically the amount they received was far less than their income while employed. Their unemployment benefits were typically not enough for them to make their loan payments and to enable them and their families to survive on an ongoing basis.
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Many of these unemployed people found it necessary to use money from their savings to continue to make their monthly loan payments. Their savings dwindled quickly. When they could no longer continue to make their payments, their mortgage companies started the foreclosure process.
The original guidelines of the Making Home Affordable program did not provide help for unemployed people facing foreclosure. Throughout 2009 the percentage of unemployed people facing foreclosure steadily grew. The Obama Administration modified the Making Home Affordable Program to address this in March of 2010.
A temporary forbearance plan was introduced. To qualify an unemployed person must live in the home on which they no longer can make the loan payments. The balance of their loan has to be less than $729,000. They have to request assistance within the first ninety days during which they can no longer make their regular monthly loan payment. They also have to submit proof that they are receiving unemployment insurance benefits.
As long as their mortgage company is participating in it, the Making Home Affordable Program requires their company to suspend their current monthly loan payment for a minimum of three months. (This can be as long as six months for some of the unemployed.) During that three to six month period, their mortgage company will reduce their payment to 31% of their gross monthly unemployment insurance benefit.
Included in that monthly payment are principal and interest, taxes and insurance and any association fee due.
At the end of the three to six month period, the normal monthly payment on the loan will resume provided that person is employed and the monthly payment is less than or equal to 31% of their gross monthly income.
If the normal monthly payment is greater than 31% of the gross monthly income, the person would be considered for a permanent loan modification under the Making Home Affordable Program. They would have to qualify for this by submitting the documents required. They also have to have made their monthly loan payments on time. Their modified loan has to pass a net present value test.
If they are still unemployed at the end of the three to six month period, unemployment insurance benefits are no longer counted as income.
If the person does not qualify for a modification under the Making Home Affordable Program, their mortgage company will consider them for an alternative to foreclosure such as a short sale or a Deed-In-Lieu of foreclosure.
In the initial guidelines published there was no clarification as to how it would be determined which unemployed people would be eligible for the temporary plan from the fourth to the sixth month.
The Obama Administration indicated that they were moving to implement this as quickly as possible. However, each individual mortgage company has to process the paperwork connected with each application. The administration hoped that it would be offered within several months.
What do you do if you are unemployed and find yourself in a position where you no longer are going to be able to make the monthly payment on your loan? Call your mortgage company. Ask for the Loss Mitigation Department. Let them know your situation. Advise them that you want to be considered for the temporary forbearance on your loan available under the Making Home Affordable Program. Keep a record of the name and phone number of the person you talk to. Also write down what they tell you.
At the same time contact a lawyer who represents people facing foreclosure. If you do not have the money to pay for the services of a lawyer, contact a local non-profit agency approved for housing counseling by the department of Housing and Urban Development (HUD). There is a list of these agencies on the HUD website. Ask them for an appointment with one of their housing counselors. Their services are paid by HUD and are free to you.
Get the lawyer or the housing counselor to represent you with your mortgage company. They are skilled in what they do. They will be able to do a far better job getting assistance for you than you will be able to on your own.
One major problem mortgage companies have had is that they have not staffed their loss mitigation departments adequately. People facing foreclosure who have applied for loan modifications to save their homes have complained about the problems they have had dealing with their mortgage companies. Many have become so frustrated that they have given up.
The modifications to the Making Home Affordable program announced in March of 2010 have had to add quite a bit of work to an already overtaxed situation. Anyone who is not familiar with the system will not be able to represent themselves adequately.
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