Mortgage Modification Options
Everything to do with mortgage loans is a hot topic these days. From the three consecutive weeks of lower rates for the 30-year fixed rate mortgage, to the collapse of mortgage companies and the federal stewardship of formerly quasi-public companies Freddie Mac and Fannie Mae, mortgages have gotten almost as much play in the media as the housing bubble.
Mortgage modification programs and options are another hot topic, though because the topic lacks the “carnage appeal” of foreclosures and outright financial collapse (and because it’s actually helpful to people), the media tend to gloss over the issue (for the most part). Here’s a quick overview of the modification plans and proposals that have been put forth, as noted by the Wall Street Journal:
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Proposal/Plan
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Description
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Notes
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Hope for Homeowners
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Lenders agree to take a loss on the loan, and the government pays off the existing mortgage and refinances into FHA loan.
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Part of the July housing stimulus bill. Effective from Oct. 1 - Sept. 30, 2011. The government estimated that 400,000 would be helped; 357 people have signed up so far.
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FHA Secure
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Bush administration program was designed to allow homeowners with good credit who had fallen behind on payments once their loans reset to higher rates to refinance into FHA loans.
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While officials estimated that it could help some 80,000 delinquent borrowers avoid foreclosure, HUD terminated the program effective Dec. 31, 2008. As of Dec. 18, some 4,100 delinquent borrowers had used the program since Sept. 2007.
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Homeowners Protection Act of 2008
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Bill proposes giving bankruptcy judges the power to reduce the principal amounts of home loans — known as a cram down.
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Introduced earlier this month by Rep. John Conyers Jr. Supporters include the National Association of Home Builders.
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FDIC Modification Plan
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The government would share in losses resulting from re-defaults on modified mortgages and pay $1,000 to loan servicers for each completed modification.
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Modeled off of the process used to modify delinquent IndyMac loans. Fed Chairman Ben Bernanke proposed this plan in a recent speech.
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Government Shares Modification Costs
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Government shares the cost when the borrower’s monthly payment is reduced.
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Also proposed by Mr. Bernanke, this plan would require the government to incur costs in all modifications not just in re-defaults.
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Government Purchases Delinquent Mortgages
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Government buys delinquent mortgages in bulk and refinances them into FHA mortgage.
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Another Bernanke proposal. It could take more time to implement but has potential to reach more borrowers than the other programs.
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Private Sector Modifcation Plans
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JPMorgan Chase, CitiMortgage and Bank of America have each announced loan modification initiatives. Other banks have also been doing modifications.
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The 14 largest national banks and thrifts modified nearly 73,000 loans in the first quarter and an additional 114,000 in the second quarter.
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Tags: 30 year mortgage rates, fannie mae, freddie mac, mortgage modification, wall street jouranl
February 1st, 2009 at 11:14 am
The most common mortgage modifications are listed below:
lowering the mortgage interest rate
reducing the mortgage principal balance
fixing adjustable interest rates within the mortgage
increasing the loan term throughout the mortgage
forgiveness of payment defaults and fees
or any combination of the above
Check out this public service site: http://mortgagemodificationinfo.org