Behind In Your Mortgage Payments? Underwater?
Becoming one of those 4 million takes five simple steps.
Step 1: Visit the Web site
Everything you need to get started is located here MakingHomeAffordable.gov
Step 2: Take the quiz
Click on "Find out if you are eligible" and then select the "Home Affordable Modification" option. (The "Refinancing" option is just for those who are current on their loans.) Take the five-question quiz. Based on your answers the site will tell you if you likely qualify for a modification under the Obama plan.
If you do - meaning you bought your house before Jan. 1, 2009, and owe less than $729,750; it is your primary residence; you are delinquent on your payments; and your payment is more than 31% of your monthly gross income - the site will present an eight-item checklist of paperwork you'll need to submit to your lenders.
Step 3: Compile the paperwork
The site recommends that you have: household-income documentation, such as pay stubs; tax returns; savings account records; mortgage statements; second mortgage info, such as home-equity loans statements; credit card bills; and information on other debt, including student and car loans.
You will also be asked to write a letter describing why you need assistance. Your reasons could include medical expenses, job or income loss, or even divorce.
A well-done hardship letter can make a difference in whether a loan wins modification, according to foreclosure-prevention counselors. These letters can point out factors that led to the delinquency but that may not be evident from your other paperwork.
"Don't say, 'I never could have afforded it in the first place,'" advised Tom Kelly, a spokesman for Chase Mortgage. "That isn't the ideal answer."
Instead, explain that illness prevented you from working for a time, that you've recovered and are back at work and paying bills again. Or a temporary job loss cause the problem, etc. Without that context, lenders may think you were just careless - or worse.
Step 4: Call your lender or servicer
Once your information packet is complete, call your lender or servicer - the company you write your monthly mortgage check to. To see if your lender is participating in this plan - or to get the phone number - click on "Contact Your Mortgage Servicer" on the Making Home Affordable site. After you've talked to one of their modification specialists, you'll be instructed to fill out an application and submit your documents.
There should be no need for face-to-face meetings with servicers, according to Jumana Bauwens, a spokeswoman for Bank of America. She said borrowers will be able to do everything over the phone and through the mail.
Step 5: Wait
During this phase, the lender will decide the approach it wants to take to reducing your debt: lowering your interest rate, extending the life of your loan, or reducing your debt balance.
The lender's first step will be to get your payment down to 38% of your monthly gross income. Once the debt is reduced that far, the government will pay the lender to lower it to 31% of income.
At that point, the loan will be rewritten, you will get the new paperwork to sign and the new payment will go into effect on your next bill.
This process has been taking several weeks to a month, so be patient. Although the banks expect it will get quicker as their personnel become more familiar with the modification plan.
"The 31% is now an industry standard and that's much more easily calculated," said Chase's Kelly.
One thing to remember: These are trial modifications that only become permanent once you make on-time payments for three consecutive months.
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