Government Foreclosure Help – How it Works
Recently a plan was revealed to help ease the foreclosure epidemic with government foreclosure help to help refinance America. Millions of homeowners are currently facing this problem assistance. Knowing how the program works is the first step to determining if you apply for this type of government foreclosure help.
This plan is meant for two types of homeowners, although others may benefit but to a lesser extent. First, government foreclosure help is available for homeowners who made large down payments and have sensible loans. But the current home market is so poor that their equity is lost because their home value is so low. Second, homeowners who are struggling to make their mortgage payments but could continue making payments of 31 percent of their income. In this situation too, government foreclosure help is available.
The program works by giving homeowners the opportunity to contact their lender to refinance their mortgage loan. If you meet the program requirements, can document your income, and still occupy the home your lender may be able to offer a lower interest rate loan. Currently, homeowners who have lost their equity because of the poor housing market don’t qualify for a refinanced lower rate loan simply because they have little equity. With the new government foreclosure help homeowners can refinance their loan with little or no equity in their home. Keep in mind this program is not applicable to second mortgages, only the primary mortgage.
It may seem that this type of government foreclosure help is useless to the first type of homeowner since they are making their payments on time. The plan is designed to stabilize the housing market but not reward people who may have made irresponsible buying decisions. By allowing people whose mortgages are larger than their home is worth to refinance, this government foreclosure help is reducing the likelihood that currently creditworthy homeowners will just walk away. This only furthers the problem of decreasing housing prices, which will ultimately lead to more foreclosures.
The program is currently only for those who are struggling to make their mortgage payments and that their payment is more than 38 percent of their income. With this government foreclosure help, once the lender agrees to lower the rate to bring the payment under 38 percent, the government pays half of the additional cost to the lender. This will allow the lender to make the payments much more reasonable without taking a complete loss for the reduced amount.
If you are already in foreclosure it will be your lender’s decision whether to make you an offer or not. There are ever increasing incentives for lenders to participate in this government foreclosure help but ultimately it is their choice. If you have already declared bankruptcy, there currently is no help under this plan. Bankruptcy law doesn’t permit the court system to modify mortgage terms. If you meet all the conditions mentioned here, contact your lender and ask if you qualify for this government foreclosure help.