Options for Foreclosure Victims

Posted in Foreclosure Victims, October 28th, 2008 |

The corridors of power at the White House and the Senate have spent numerous months in experimenting with measures that will contain the foreclosure crisis. But to the ordinary man overwhelmed with loan the very process of trying to get assistance may seem confusing. But there are many options for foreclosure victims.

Last July, a help scheme was launched that was for those who had gone “upside down”. It meant that the value of the house had become less than the amount of the loan due. By the Housing and Economic Recovery Act of 2008 was born the work out plan of Hope for Homeowners. By it the FHA (Federal Housing Agency) provided insurance so has to help foreclosure victims who were in occupancy of their houses qualify for a long term traditional mortgage with lower interest rate. The modified loan would cover 90% of the current appraised value of the house up to a limit of $550,440. The insurance coverage by FHA would make it possible for the borrower to avail of low interest.

The government initiated this three-year plan with a fund of $300 billion. The scheme is voluntary on the part of the lenders who may refuse to alter the terms of the previous mortgage. There are a good number of lenders who want to modify the loan and thus avoid the hassle of foreclosure. There is also a fear that too much stubbornness might cause the Congress to come down ever more harshly on the lenders.

Hope for Homeowners are for those who mortgages have gone underwater, contracted before January 2008 and have a monthly payment responsibility that is more than 331% of their earnings.

Borrowers should also try their level best to contact respective lenders. However it will be wrong to entertain high hopes about immediate assistance. The programme has only recently been launched and many lenders are still mulling over the process.

On 1st December Countrywide (now under Bank of America) is planning to introduce a “home retention” comprehensive plan to steer foreclosure victims towards Hope for Homeowners rescue scheme or any other similar programme. Those who are in default for over 60 days are advised to call up the lender and open communications for workouts. From 1st December they will be able to move on a fast track regarding new loans.
Filing of bankruptcy will not help in saving the house until the bankruptcy judges are allocated the power to relax the mortgage terms. This is a bone of contention between the two political parties.