Why Millions May Be Leaving Mortgage Assistance on the Table

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After John DeMetro suffered a debilitating arm injury on the job in 2005, he began to slip on paying his mortgage.

Though Walmart, his employer at the time, paid for the 19 surgeries and 2½ years of therapy that it took for him to recover, DeMetro, of Utica, N.Y., said that he could no longer work enough hours to keep up with the interest rate on his adjustable-rate mortgage, which spiked at around the time of his injury.

Over the course of six years, DeMetro said, he tried to fix the situation himself, applying for a loan modification but being rejected three times. It wasn't until January that he finally got some help: He consulted with the NeighborWorks HomeOwnership Center, a free government-subsidized housing counseling organization whose persistent efforts finally got his interest rate lowered from 13 percent to 3 percent. Housing advisor Rose Marie Roberts (pictured below) acted as an intermediary between DeMetro and his bank, keeping track of his paperwork and submitting it over the Web.

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Mortgage Assistance Programs
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Why Millions May Be Leaving Mortgage Assistance on the Table

Purpose: Lower your monthly mortgage payments.

General eligibility guidelines:
• You obtained your mortgage on or before January 1, 2009.
• You owe up to $729,750 on your primary residence or single unit rental property
• You owe up to $934,200 on a 2-unit rental property; $1,129,250 on a 3-unit rental property; or $1,403,400 on a 4-unit rental property
• The property has not been condemned
• You have a financial hardship and are either delinquent or in danger of falling behind on your mortgage payments (non-owner occupants must be delinquent in order to qualify).
• You have sufficient, documented income to support a modified payment.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud or forgery, money laundering or tax evasion, in connection with a mortgage or real estate transaction.

Next Steps: Contact your mortgage company to see if you are eligible. Also, fill out the following forms:

Request for Mortgage Assistance Form
IRS Form 4506T-EZ   or 4506-T
Verification of Income

See the Making Home Affordable website for more details.

Purpose: To allow homeowners with Fannie Mae or Freddie Mac-guaranteed mortgages to refinance into a lower rate. The program primarily targets "underwater" homeowners, borrowers who owe more on their mortgages than their homes are worth. The Obama administration recently lifted a cap that prevented homeowners whose mortgages were more than 125 percent the value of their homes from qualifying. That has extended the program to a much wider swath of homeowners.  

General eligibility guidelines:
• The mortgage must be owned or guaranteed by Freddie Mac or Fannie Mae.
• The mortgage must have been sold to Fannie Mae or Freddie Mac on or before May 31, 2009.
• The mortgage cannot have been refinanced under HARP previously unless it is a Fannie Mae loan that was refinanced under HARP from March-May, 2009.
• The current loan-to-value (LTV) ratio must be greater than 80%.
• The borrower must be current on the mortgage at the time of the refinance, with a good payment history in the past 12 months.

Next Steps: Determine if Fannie Mae or Freddie Mac owns your mortgage using their Loan Lookup Tools. You can also contact your current mortgage servicer or another that is approved by Fannie Mae or Freddie Mac to inquire about HARP. You can alsocompare rates and costs with additional mortgage companies to ensure best refinance terms.

See the Making Home Affordable website for more details.

Purpose: To allow homeowners with FHA-insured mortgages worth more than their homes to refinance into a  lower rate.

General eligibility guidelines:
• Your mortgage is not owned or guaranteed by Fannie Mae, Freddie Mac, FHA, VA or USDA.
• You owe more than your home is worth.
• You are current on your mortgage payments.
• You occupy the house as your primary residence.
• You are eligible for the new loan under standard FHA underwriting requirements.
• Your total debt does not exceed 55 percent of your monthly gross income.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.

Next steps: Talk to your mortgage owner to see if they want to participate in an FHA refinance. Or talk to an HUD-approved housing counselor for free.

See the Making Home Affordable website for more details.

Purpose: To help people who can no longer afford their mortgages to transition to more affordable housing. The program provides two options: a short sale or a Deed-in Lieu of foreclosure.

General eligibility requirements:
• You live in the home or have lived there within the last 12 months.
• You have a documented financial hardship.
• You have not purchased a new house within the last 12 months.
• Your first mortgage is less than $729,750.
• You obtained your mortgage on or before January 1, 2009.
• You must not have been convicted within the last 10 years of felony larceny, theft, fraud, forgery, money laundering or tax evasion in connection with a mortgage or real estate transaction.

Next steps: Contact one of the HUD-approved housing counselors for free to discuss your options. When it's time for HAFA, be prepared to provide the following:

Request for Mortgage Assistance (RMA)

For more information, see the Making Home Affordable website.

Purpose: Get free advice on buying a home, renting, defaults, foreclosures, and credit issues.

General eligibility guidelines: This service is open to everyone.

Next Steps: Search for a HUD approved housing counselor near you, or call 888-995-HOPE (4673) for free, comprehensive assistance around-the-clock.

Purpose: To help unemployed people manage mortgage payments. The program can either reduce payments or suspend them altogether for 12 months or more.

General eligibility guidelines:
• You are unemployed and eligible for unemployment benefits.
• You occupy the house as your primary residence.
• You have not previously received a HAMPSM modification.
• You obtained your mortgage on or before January 1, 2009.
• You owe up to $729,750 on your home.

Next steps: Contact a HUD-approved housing counselor at 888-995-HOPE (4673). They will help you understand your options, design a plan, and prepare your application. You can also contact your mortgage servicer to see if you are eligible.

See the Making Home Affordable website for more information.

Purpose: To recover damages if financially injured during a foreclosure from 2009 to 2010.

General eligibility guidelines:
• Your mortgage loan was active in the foreclosure process between January 1, 2009 and December 31, 2010.
• The property was your primary residence.
• You had one of the providers listed here.

Next Steps: Fill out the form for a free independent foreclosure review here. Make sure to send the form by September 30, 2012.

Click here for more info.

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It turns out that NeighborWorks was available to DeMetro the whole time -- and could have gotten his situation under control long ago. But he waited years to seek it out because he was unaware that it even existed. He speculates that that may have been because, as with so many other mortgage assistance offers flooding his mailbox, he was afraid of scams and overlooked it.

"Everybody thinks that everything is a scam," DeMetro said. "So you think that always, and you kind of don't notice [the legitimate programs]."

Indeed, experts say that many distressed homeowners fail to seek government-backed housing assistance for the same reason.

A Record of Success

In a survey of homeowners conducted in May by Money Management International, a financial counseling organization approved by the Department of Housing and Urban Development, 53 percent of respondents cited fears of scams or fraudulent services as reasons why they wouldn't seek help from housing counseling organizations.

While skepticism of mortgage-assistance offers can be a good thing, it can also cause homeowners to miss out on meaningful help.

A study by the Urban Institute found that HUD-backed housing counseling groups help increase the chances of homeowners scoring a loan modification by 89 percent. And a separate study from HUD found that nearly 70 percent of surveyed homeowners who used counseling obtained a mortgage remedy.

But many borrowers remain unaware of housing counseling's existence, let alone its impressive results.

"If we did have marketing dollars -- and the government could put in more marketing dollars -- then we could get the word out. But unfortunately we're not at that point," said Joanne Kerstetter, vice president of education and community relations at Money Management International.

Still, the National Foreclosure Mitigation Counseling program has reached 1.3 million homeowners since its launch in 2008, reports NeighborWorks America, which administers it.

But other assistance programs are not reaching as many homeowners as consumer advocates would like.

A foreclosure review program launched by the Federal Reserve and Office of the Comptroller of the Currency last year aims to provide redress to homeowners who lost their homes to illegal foreclosure. But as of April 20, only 4 percent of the 4.1 million borrowers who were mailed questions about the review actually asked for one -- despite revelations that banks had committed foreclosure improprieties on a mass scale. Banks settled an investigation into foreclosure abuses by agreeing to pay a $25 billion fine to 49 states in February.

Likewise, the Home Affordable Modification Program had set a goal of reaching 3 million to 4 million borrowers. Only 990,000 homeowners had taken advantage of a HAMP modification as of March 2012, according to HUD's April Housing Scorecard. In an effort to boost the program, the Obama administration recently tripled subsidies to banks who perform the modifications.

'People Just Don't Talk About It'

Perhaps one of the reasons why the program hasn't aided more homeowners is because some distressed borrowers "practice denial," said Jack Guttentag, an emeritus professor of finance at the University of Pennsylvania's Wharton School who offers mortgage advice on his website, mtgprofessor.com.

Traumatized by a deluge of debt-collecting calls and letters, some homeowners retreat into themselves, Guttentag said. "You put your head in the sand, and you hope it will go away -- which, of course, it never does."

DeMetro can understand that. He says that he and his wife were embarrassed by their financial situation, so they kept mum on it.

"People just don't talk about it," he says. "We didn't tell anybody, either. Nobody says, 'I'm in trouble with my mortgage.' "

Daren Blomquist, vice president of online listing service RealtyTrac, mentioned yet another reason that borrowers in a state of foreclosure don't take advantage of government-backed programs like HAMP or housing counseling: They don't mind living in their homes for free.

"Anecdotally, what we've heard from some servicers is that not all of these borrowers really want to be saved from foreclosure," Blomquist said. "They're in a situation ... where they haven't been making any mortgage payments for one or two years or more."

DeMetro says that if he hears from any of his peers about their mortgage problems -- which he hasn't yet -- he'll take them straight to NeighborWorks HomeOwnership Center's doorstep.

"I would give them [my adviser's] phone number, email, take them there, whatever," he said.

How to Save Your Home from Foreclosure

See also:
How to Get Your Mortgage Above Water
Should Underwater Homeowners Just Walk Away?

Baltimore May Use 'Robo-Signing' Money To Level 700 Homes

13 PHOTOS
Cities With The Most Homes in Foreclosure
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Why Millions May Be Leaving Mortgage Assistance on the Table

Foreclosure rate: 1 in 347 homes
Number of homes: 942,312 (24th most)
Foreclosures (April 2012): 2,717 (16th most)
Homeprice decline from peak: -54.2% (sixth largest decline)


Median home prices in the Orlando area fell by 54.2 percent from their peak in the second quarter of 2006 through the end of 2011. Of the 50 most populous metro regions in the U.S., the Orlando-Kissimmee area has the tenth highest foreclosure rate in April, of one in every 347 homes. Orlando had 2,717 new homes in foreclosure this past April, up 12.9 percent from the 2,406 in April 2011. The forecast for the future is similarly bleak. Fiserv projects Orlando homes to continue to lose value between the fourth quarter of this year and the fourth quarter of 2013, predicting a 1 percent decline in prices over that time period.


See foreclosures for sale in Orlando and Kissimmee, Fla.


Source: 24/7 Wall St.


PHOTO: Jordi Gomara, Flickr.com

Foreclosure rate: 1 in 321 homes
Number of homes: 3,797,247 (third most)
Foreclosures: (April 2012): 11,840 (The most)
Home price decline from peak: -36.8% (twelfth largest decline)


From their peak in early 2007, home prices in Chicago fell 36.8 percent through the end of 2011. In April, the Chicago-Naperville-Joliet metro area had the largest number of new homes in foreclosure among the 50 largest MSAs, at 11,840. This represented an increase of 25.5 percent from April 2011 when 9,433 homes entered foreclosure. However, the number of foreclosures represents a 7.63 percent decline from March, when the Chicago area also led all metropolitan areas with 12,818 foreclosures. Another positive sign for Chicagoans: Home prices are projected to rise 6.3 percent annually through 2016, according to Fiserv.


See foreclosures for sale in Chicago, Naperville and Joliet, Ill.

Foreclosure rate: 1 in 315 homes
Number of homes: 1,353,158 (17th most)
Foreclosures: (April 2012): 4,295 (eighth most)
Home price decline from peak: -48% (eighth largest decline)


Residents of the Tampa, Fla., metro area watched the median home price in the region fall to $137,000 in the fourth quarter of 2011 -- a 48 percent drop from its peak. The region recorded 4,295 foreclosures in April 2012. To make matters worse, that number is up from the April 2011 figure. Then, only 2,701 homes in the area were new to foreclosure, meaning that foreclosures increased by 59 percent in the past year. One in every 315 homes in this MSA had a foreclosure start this past April.


See foreclosures for sale in Tampa, St. Petersburg and Clearwater, Fla.

Foreclosure rate: 1 in 313 homes
Number of homes: 1,798,501 (12th most)
Foreclosures: (April 2012): 5,755 (sixth most)
Home price decline from peak: -56% (third largest decline)


Home prices in the Phoenix region -- the country's twelfth-largest metropolitan area by housing units -- declined by 56 percent from their 2006 peaks through the end of 2011. Although this accounted for the third-largest decline in home prices among all metropolitan areas, the Phoenix region posted a 22.64 percent decline in foreclosures from March, as the number of new foreclosed homes fell from 7,439 to 5,755. Likewise, in the last year, the number of foreclosure starts in the area fell by 44.44 percent, from 10,358 in April 2011 to 5,755 this past April.


See foreclosures for sale in Phoenix, Mesa and Scottsdale, Ariz.

Foreclosure rate: 1 in 309 homes
Number of homes: 410,031 (the least)
Foreclosures (April 2012): 1,326 (23rd least)
Home price decline from peak: -19.3% (25th largest decline)


Home prices in the Salt Lake City area declined by roughly 20 percent from their peak in 2007 to the fourth quarter in 2011, which is a modest decline compared to other regions on this list. Nevertheless, foreclosure rates were higher than all but five of the largest metros in the country. Compared to the 1,406 foreclosures in April of 2011, April 2012's foreclosures declined by 5.7 percent. This metro area is one of the few on the list that analysts are bullish about; home prices are projected to increase by 9.5 percent from this year's fourth quarter to the fourth quarter in 2013.


See foreclosures for sale in Salt Lake City.


Foreclosure rate: 1 in 298 homes
Number of homes: 2,165,495 (ninth most)
Foreclosures: (April 2012): 7,271 (fourth most)
Home price decline from peak: -35% (14th largest decline)


As of the fourth quarter of 2011, home values in Atlanta fell by 35 percent from their peak. The Atlanta area has the ninth most housing units of any region on the list, at 2,165,495, and
the median price of these homes was just $110,000 in the fourth quarter of 2011. To make matters worse, the area's April 2012 foreclosure figure was a staggering 7,271 homes -- the fourth most among the nation's largest cities. Things may be on the upswing though -- since the number of homes in foreclosure fell by 11 percent from the prior month.


See foreclosures for sale in Atlanta, Sandy Springs and Marietta, Ga.



PHOTO: Matthew Paulson, Flickr.com

Foreclosure rate: 1 in 277 homes
Number of homes: 871,793 (23rd fewest)
Foreclosures: (April, 2012): 3,147 (twelfth most)
Home price decline from peak: 54.7 percent (fifth largest)


The first California metropolitan region on this list, the Sacramento-Arden-Arcade-Roseville area had one in 277 homes in foreclosure in April. With home prices down 54.7 percent from their high at the end of 2005, the Sacramento area registered the fifth-largest decline in home prices. The area had the twelfth-most foreclosures in the U.S. However, foreclosures are down by 39.01 percent from last year, when April 2011 had 5,160 homes in foreclosure. Additionally, the number of foreclosures also decreased by 26.7 percent from the previous month, from 4,294 to 3,147. Fiserv expects home prices in the area to rise 6.3 percent annually through the fourth quarter of 2016.


See foreclosures for sale in Sacramento, Arden-Arcade and Roseville, Calif.



PHOTO: absurd_hero, Flickr.com

Foreclosure rate: 1 in 273 homes
Number of homes: 2,464,417 (fifth most)
Foreclosures: (April 2012): 9,031 (third most)
Home price decline from peak: 54.2% (seventh largest decline)


The Miami metro region topped all Florida regions in the number of new foreclosures. It also ranks third in new foreclosure rates among the 50 largest metros with 9,031 foreclosures in April, 2012 -- a rate of one in 273. While foreclosures in the area decreased between March, 2012, and April, 2012, to the tune of 9.2 percent, the future appears gloomy. Prices in this region are forecast to fall another 3.8 percent between the fourth quarters of 2012 and 2013.


See foreclosures for sale in MiamiFt. Lauderdale and Pompano Beach, Fla.


Foreclosure rate: 1 in 249 homes
Number of homes: 840,343 (22nd fewest)
Foreclosures: (April 2012): 3,378 (tenth most)
Home price decline from peak: 61.8% (the largest decline)


Home prices in Las Vegas, the poster child of the housing crisis, plunged by 61.8 percent from their peak in early 2006 through 2011 -- the greatest decline of any of the nation's 50 largest metros. Although new foreclosures in the Las Vegas-Paradise region declined by 66.1 percent to 3,378 over the past year, the number of foreclosures in April represents a slight increase over March, when 3,301 new homes were in foreclosure. Making matters worse, prices are expected to fall by another 3.3 percent between the fourth quarter of 2012 and the fourth quarter 2013, according to Fiserv.


See foreclosures for sale in Las Vegas and Paradise, Nev.

Foreclosure rate: 1 in 213 homes
Number of homes:1,500,344 (14th most)
Foreclosures: (April 2012): 7,049 (fifth most)
Home price decline from peak: -56.6% (second largest decline)


As of the fourth quarter of 2011, prices in the Riverside metro area fell by 56.6 percent from their peak, the second largest drop among top-50 metros. In addition, this region is first in terms of now foreclosure rate, at one in 213. While the number of homes (1.5 million) ranks 14th of the 50 largest regions, the area's new foreclosure count for April, 2012, reached 7,049 -- fifth highest overall. It appears, however, that, the situation is improving; between March  2012 and April 2012, foreclosures dropped 10.8 percent.


See foreclosures for sale in Riverside, San Bernardino, and Ontario, Calif.


PHOTO: Don Barrett, Flickr.com

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