Q: I heard you speak on the radio about consumers getting help from their mortgage companies to refinance loans to a better term allowing them to be able to afford their payments.
I have a neighbor who is in trouble. He has one of those adjustable rate mortgage (ARM) loans and it has become unaffordable for him. He needs to know how to go about getting his mortgage adjusted.
I told him that the mortgage companies are obligated to provide assistance as part of the bailout legislation passed (I may have been wrong). I recall you mentioning the Department of Housing and Urban Development (HUD) where he could go if his mortgage company wasn’t willing to work with him.
Do you have some information that I can pass along to him? He’s a great guy and I’d hate to lose my neighbor.
A: It’s nice to see you taking an active interest in helping your neighbor and friend. There are some programs that might help him keep his house.
If your neighbor is 90 days late in paying, and he owes at least 90 percent of the current value of the home and the home is his primary residence, the new Streamlined Modification Program (SMP) might be able to help.
The SMP is sponsored by the government agency that now oversees Fannie Mae, Freddie Mac, and a host of other loan servicers. If your neighbor qualifies for the program, he may be able to reduce his monthly mortgage payment including real estate taxes, insurance and any association fees, to just 38 percent of his gross monthly income.
The new debt-to-income ratio will be accomplished either by lengthening the loan to 40 years, lowering the interest rate to as little as 3 percent for up to 5 years, or reducing the principal balance. (If the principal balance is reduced, you’ll have to make up the missing money when you sell the property.)
Mortgage Loan Refinance Helps Lender Too
Loan servicers are being encouraged financially to participate. The government is paying $800 for each homeowner who is put through the program.
To get started, your neighbor can go online to HUD.gov and find a HUD housing counselor near where you live. Your neighbor can also call the HOPE NOW hotline: 888-995-HOPE.
If your neighbor has a Countrywide or Bank of America loan, he can contact Bank of America through its website (bankofamerica.com) to start a similar process of restructuring his loan. g>