Facing Foreclosure Or Delinquency? Five Federal Programs Homeowners Should Review In 2013

FARMINGTON HILLS, Mich.  -- As homeowners receive their annual property assessments and taxable valuations in the mail, many will see the continued drop in the value of their home. Despite recent reports of declining "underwater" homeowners in the fourth quarter of 2012, there are still many homeowners looking for help.

"Property values are starting to creep up in some areas, but many homeowners are still underwater and owe more than their home is worth," said Rick Bialobrzeski , GreenPath director of communications. "Each week, we talk to hundreds of homeowners who are having trouble keeping up with their mortgage payments."

The GreenPath Debt Solutions housing department recently compiled a list of five government programs that homeowners should consider reviewing in 2013.

Here are the five housing programs, as compiled by GreenPath Debt Solutions.

1. HAMP Tier 1 and Tier 2 - The Home Affordable Modification Program (HAMP) has been extended through 2013 and expanded to help more homeowners.   HAMP Tier 2 is now an option for homeowners who:

• Want to modify a home that is not their primary residence.
• Previously did not qualify for HAMP, because their debt-to-income ratio was 31% or lower.
• Previously received a HAMP trial plan, but defaulted on their trial payments.
• Previously received a HAMP permanent modification, but defaulted on their payments.
• Explore details at www.makinghomeaffordable.gov/programs/lower-payments/Pages/hamp.aspx. Or contact a HUD-approved housing counseling agency for a free assessment of your situation and possible options.

2. Home Affordable Foreclosure Alternatives (HAFA) Updates – This program is designed to help homeowners, whose loans are not backed by Fannie Mae or Freddie Mac, transition to more affordable housing.  HAFA provides two options for transitioning:  a short sale or a Deed-in-Lieu for foreclosure. 

In a short sale, the mortgage company lets a borrower sell their home for an amount that falls short of the amount they still owe.  In a Deed-in-Lieu, a borrower transfers the title of their home back to the mortgage company.

New policy changes for HAFA took effect February 1, 2013:

• Servicers are required to make a decision on a borrower's request for a HAFA short sale within 30 days, down from 45 days. 
• If a borrower is 90 days or more delinquent and has a FICO score less than 620, they are considered to have a "pre-determined hardship."  Borrowers with a pre-determined hardship must execute a hardship affidavit, but servicers do not have to further validate the hardship. 
• Non-owner occupied properties are now eligible for short sales.
• Up to $3,000 in relocation assistance may now be available to tenants living in a distressed property.
• The amount the primary mortgage holder can pay to subordinate lien holders has been increased from $2,000 to $5,000.

These changes do not apply to mortgages backed by Fannie Mae or Freddie Mac.  Those agencies no longer participate with HAFA because they have their own Standard Short Sale and Standard Deed in Lieu guidelines.

3. Independent Foreclosure Review Alternative Settlement - In January, thirteen servicers subject to the Independent Foreclosure Review reached an agreement with federal regulators to pay more than $8.8 billion in cash payments and other assistance to help borrowers.  This agreement replaces the Independent Foreclosure Review program, which had not helped as many people as anticipated.  The agreement enacted a broader framework that allows eligible borrowers to receive compensation more quickly.  More than 3.9 million borrowers, whose homes were in foreclosure in 2009 and 2010, are expected to receive cash compensation in a timely manner.

Servicers include Aurora, Bank of America, Citibank, Goldman Sachs, HSBC, JP Mortgage Chase, Morgan Stanley, MetLife Bank, PNC, Sovereign, SunTrust, U.S. Bank and Wells Fargo.
Borrowers whose mortgage loan was serviced by one of the participating servicers and who were involved in a foreclosure action, between January 2009 and December 2010, will receive compensation, whether or not they filed a request for review form. Borrowers do not need to take further action to be eligible for compensation.  Payment agents will contact eligible borrowers by the end of March.

Borrowers who have questions about their eligibility or who need to update their contact information can call the toll-free Independent Foreclosure Review number at 888-952-9105.

4. Fannie Mae Refinancing Incentive - Fannie Mae announced in January that lenders will be allowed to offer a refinancing incentive.  These incentives would be used to obtain a lower payment or move to a more stable mortgage product. 

The lender may provide a borrower incentive that reduces the amount of the mortgage loan being refinanced, provided that:

The amount of the incentive does not exceed $2,000;

• No repayment is required, and;
• The payment is reflected on the HUD-1 Settlement Statement as a lender credit
• Or the lender may provide a cash or cash-like (for example, a gift card) incentive that is not reflected on the HUD-1 Settlement Statement, provided that:
• The amount of the incentive does not exceed $500, and
• No repayment is required

5. Hardest Hit Funds -In 2007, the Federal government allocated Hardest Hit Funds to 18 states and the District of Columbia to help homeowners who are unemployed or underemployed.  Many of the states have recently made program changes to help more homeowners.  

States have until the end of 2017 to utilize the funds allocated through this program.   To find out more regarding specific Hardest Hit Fund programs in your state, contact the state Housing Finance Agency: www.ncsha.org/housing-help.

Hardest Hit Fund states include Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan,Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee and Washington, D.C.

GreenPath can assist homeowners by explaining these housing programs and other potential options. Counselors provide pre-purchase counseling for people interested in purchasing a home, foreclosure prevention counseling for people struggling to make their mortgage payment, and reverse mortgage counseling for seniors.  For more information, visit www.greenpath.org.