Try a Loan Modification
Having trouble making mortgage payments? You can save your home without refinancing.
If you can't afford your monthly mortgage payment and you can't refinance, a loan modification may keep you in your home.
The Making Home Affordable program, announced by the Obama administration in March, aims to reduce borrowers' monthly payments to no more than 31% of their pretax income.
Row 0 - Cell 0 | Refinance, If You Can |
Row 1 - Cell 0 | I Owe More Than My House is Worth |
Row 2 - Cell 0 | Fighting a Foreclosure |
However, only homeowners in very specific circumstances qualify. Candidates must live in their homes. They can already be behind in their payments or they must prove that they stand at the threshold of default because of financial hardship. The balance of their first mortgage can't exceed $729,750, and they must make their new payment for a three-month trial period in order to qualify.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
For those who qualify, though, the savings can be dramatic. Say a homeowner has a $320,000 mortgage but can't make the monthly payment of $2,023 (excluding taxes and insurance). Home Affordable could cut the payment to $1,254, with an interest rate of 2%.
And there's an additional benefit: Although the program lasts for just five years, in each of those years the loan principal is reduced by $1,000 -- as long as the homeowner stays current on the payments. After the five years are up, the lender will increase the interest rate by one percentage point a year until it reaches the prevailing rate. (For details, visit www.makinghomeaffordable.gov.)
Homeowners who qualify must also deal with a lender that's both in the program and willing to help. (Lenders get financial incentives from the government to participate.) Participation is voluntary but you can probably expect that lenders or loan servicers that handle loans owned or guaranteed by Freddie Mac or Fannie Mae will participate. By early May, 14 lenders had formally announced their participation in the program; their names and phone numbers are listed on the Making Home Affordable Web site. The extent to which these lenders will offer loan modifications remains to be seen.
If you need a loan mod, don't wait for your lender to take action. Contact your lender and ask for the loss-mitigation or home-retention department. If you get the runaround, seek help elsewhere. Consumer advocate Ralph Roberts, in Detroit (www.keepmyhouse.com), advises clients to hire an advocate. A good option is to call a HUD-certified housing counselor for free help (call the Hope Now hotline at 888-995-4673 or visit www.hopenow.com). Roberts also warns that loan-modification assistance is the new gold rush and that scams abound (see Scams Exploit Hard Times).
You may want to hire an experienced real estate lawyer to negotiate on your behalf. The lawyer should also review your original loan documents for signs that you were a victim of mortgage fraud. If that proves to be the case, you should gain additional leverage over the lender, regardless of whether it's participating in the Obama plan. The leverage will help you modify or replace your loan, as well as forestall foreclosure. If paying legal fees is an issue, seek help from a legal-aid society or from lawyers doing pro-bono work.
-
Use An iPhone? You May Be Hearing From A Class-Action Lawsuit Group
A handful of suits against the iPhone maker seek to crack down on everything from app store purchases to messaging.
By Keerthi Vedantam Published
-
Capital One/Discover: What's In Their Wallet For You?
Push back on Capital One's planned merger with Discover is growing with one group of consumer advocates calling for a public hearing.
By Keerthi Vedantam Published
-
403(b) Contribution Limits for 2024
retirement plans Teachers and nonprofit workers can contribute more to a 403(b) retirement plan in 2024 than they could in 2023.
By Jackie Stewart Published
-
Roth IRA Contribution Limits for 2024
Roth IRAs Roth IRA contribution limits have gone up for 2024. Here's what you need to know.
By Jackie Stewart Published
-
Best Foreclosure Sites for Finding Properties
Making Your Money Last Wondering how to find foreclosed homes for sale for your next residence or to flip for a profit? These websites will guide you to foreclosures and real estate-owned properties to buy.
By Bob Niedt Last updated
-
Luxury Home Prices Rise as the Rich Dodge High Mortgage Rates
Luxury home prices rose 9% to the highest third-quarter level on record, Redfin reports, growing nearly three times faster than non-luxury prices.
By Kathryn Pomroy Published
-
Four Tips for Renting Out Your Home on Airbnb
real estate Here's what you should know before listing your home on Airbnb.
By Miriam Cross Published
-
Five Ways to a Cheap Last-Minute Vacation
Travel Procrastinator? No matter. You can pull off a fun and memorable getaway on a moment's notice — without breaking the bank.
By Vaishali Varu Last updated
-
How Much Life Insurance Do You Need?
insurance Instead of relying on rules of thumb, you’re better off taking a systematic approach to figuring your life-insurance needs.
By Kimberly Lankford Published
-
When Is Amazon Prime Day?
Amazon Prime In 2023 Amazon had two Prime Day events — one in July and another, called Big Deal Days, in October. We expect 2024 to follow the same schedule.
By Bob Niedt Last updated