Mortgage relief for unemployed borrowers
Washington Post staff writer Renae Merle, and Andrew Jakabovics, Associate Director for Housing and Economics at the Center for American Progress, took questions on the proposal and which borrowers will be eligible for aid.
Eligibility for employed borrowers?
It will probably take some time to get the program up and running (probably not until the summer), but as I understand it, you would ask your servicer if they will allow a short refinance into FHA.
What Relief is going to be provided for people who played by the rules?
The government's other refinancing program, HARP, was launched last year, but struggled to make any impact. And it was limited to borrowers with loans backed by Fannie Mae and Freddie Mac, which this program isn't.
Jobs and the economy
Willingness of lenders to participate
Delaying the inevitable
buying more than you could afford
If your servicer is not participating in HAMP, however, none of these rules or protections would apply to you (unfortunately).
When does it end?
I think administration officials would say that they cannot prevent every foreclosure and aren't trying to. Some people will lose their home even if these programs work as hoped.
But what they are trying to do is keep enough distressed properties off the market to help the housing sector stabilize and help those that can be helped.
Coming Up Short, More And More (Post, July 11, 2009)
As part of these new initiatives, the administration is going to offer lenders more money to agree to a short sale. They are hoping this extra cash will fuel more short sales. Also, homeowners will get $3,000 (not just $1,500) to help cover relocation costs.
It sounds like your bank hopes your wife will find a new job soon and then you will be able to resume normal mortgage payments. But if you believe that this is going to be a long term problem, maybe they will be willing to offer a loan modifictation.
Helping those underwater
In general, lenders already price the risk of default into their interest rates (hence, riskier borrowers get higher priced loans). Both HAMP and the FHA short-refi program are designed to help banks and investors minimize losses, not exacerbate them.
If You Can't Afford it...
Choose to Buy
Unfortunately, the way the HAMP contract between servicers and Treasury was drafted, borrowers who are wrongfully denied assistance have no standing to sue for a modification. Moreover, the penalties in the contract focus on ensuring incentive payments to servicers are not paid for non-compliant modifications. There are no clear penalties for failure to modify eligible loans. (Theoretically, Treasury can withhold payments to the servicers, but if the loans aren't getting modified anyway, there are no payment to withhold.) This has been a huge point of contention for me (along with many housing counselors and consumer advocates) and is incredibly frustrating.
In the mean time, you might try an escalation of your case with the HMP Admin team at Fannie Mae tasked with overseeing the program. See the following: https://www.hmpadmin.com/portal/resources/escalation.html
remarkable rage 2
If you have a loan backed by Fannie Mae or Freddie Mac there is a federal program, HARP, that might help you. But you have to have a good credit rating etc. to qualify and can't be too underwater.
The new FHA refinancing program could help. But since it's voluntary, a lot will continue to depend on your lender.