First Look: Inside the $75 Billion Plan to Save Housing

A look at the number of trial loan modifications that have succeeded since the government launched its program last June, with CNBC’s Diana Olick.

Top Five Resources for Upside Down Homeowners

Upside down in your home and facing difficult financial times? Take control of your situation today and exhaust all the resources available to you! Don’t know what those resources are? Well, I’ve gathered the top five resources here to help you get started.

1. First, you need to know what kind of a loan(s) you have. If you have a Fannie Mae or Freddie Mac loan, you may qualify for either a refinance or loan modification through the Making Home Affordable Plan introduced earlier this year by President Obama. Click here for the Loan Look-Up Tool and find out if you have a Fannie Mae or Freddie Mac loan.
2. Find out if you are eligible to refinance your home – yes, this is possible when you are upside down in your home (as long as your first mortgage does not exceed 105% of current market value). See the previous link for more eligibilty requirements).
3. If you can’t refinance, find out if you can qualify for a loan modification. You don’t need to be delinquent in order to qualify for this program! See the previous link for more eligibility requirements.
4. Contact a HUD-approved housing counselor to help you determine your eligibility, walk you through the documents your lender will need, and can sometimes contact your lender with you (by the way, this is a free service offered by HUD). Find a HUD-approved (not-for profit) housing counselor here.
5. Contact your lender and open the lines of communication about your situation. Be sure to have your facts straight before you call so that you can give an accurate accounting of your financial situation. Each lender works a little differently – be prepared to be transferred around before you get to the right department (keep accurate notes of the date and time you called, who you spoke with, their contact information: phone, mail, fax, and email, the name of the department that they work in, and the outcome of your call). Don’t get discouraged if your first few calls don’t yield the response you were looking for. Be polite, but persistent and clarify or repeat back the information that the representative gives you so that you are sure you understand.

Each situation is different and presents different challenges and possible solutions. If you are overwhelmed with this process, don’t be afraid to ask for help. As a Certified Distressed Property Expert (CDPE), I can be an advocate for you and help connect you with a local CDPE to consult with you and walk you through the process. Know that you are not alone, there are many people who are in the same position as you and there is help! Contact me today and get started on the road to recovery!

I Lost My Job, Now What?

You thought you were secure and prepared to dig in and ride out the economic downturn. Then, the unthinkable happens; you get laid-off or receive a notice that your company is downsizing and your position has been eliminated. Ahh! Take a breath, don’t panic! You’ll need your wits about you to act quickly to save you and your family from a financial disaster. It could get worse? Oh yes! Losing your job or being laid off is just the start. If you don’t make some quick changes,this loss of income will affect you for a long time to come.

What to do?

First, sit down an update your budget. Yes, I talk a lot about budgeting and mention it all the time. It’s so important to have pre-set spending limits. But most importantly, you need to reconcile your budget against your actual spending habits. With the invention of the debit card, a lot of us have gotten away from balancing the old checkbook register. Time to get with the program! A really helpful tool to help you track your spending is www.mint.com. This is a fabulous online resource (they even have an app for the iphone to allow you to track your expenses on the go)!  It’s safe & secure because it does not allow you to make transactions, it just reports information.  Be sure to read their security policy for more information.

Secondly, cut your budget (and still allocate money towards savings) to equal the income you have coming in. Don’t immediately start dipping into your savings cushion to maintain your lifestyle while you look for a job. Whoa! Radical, yes. Over-reacting, no. If you’re reading this post and have not lost your job, I would highly recommend that you seriously look at your budget, expenses, and your savings. If you don’t have at least 6 – 9 months worth of reserves saved up, you need to slash as much as you can from your budget to prepare you for the unthinkable. If you cannot get your expenses down to equal the amount of income you have coming in, pick up the phone and start dialing. Start with your mortgage company and inform them of what has happened and ask for help. There are several options that the lender can offer, if they don’t – ASK them and prepare to be persistant.

Options you can ask about include:

• Loan Extension – where your lender “freezes” your loan for periods of up to 3 months, during which time no payment is due. The payments are then added on to the end of your loan at your normal monthly payments.
• Forbearance – this option allows you to work out an alternative payment schedule with your lender, details of this arrangement will vary by lender and the type of loan you have. If you have a government loan such as FHA or VA you may qualify for additional help.
• Loan Modification – the terms of your loan are modified, usually this involves changing the term of the loan and the interest rate (if you are unemployed, you may not qualify since you need to show an ability to re-pay the loan).
• Loan Refinance – if you have a higher interest rate or adjustable rate mortgage, you may be able to refinance your mortgage down to a lower monthly payment. But this option requires you to be able to pay closing costs, equity in your home, and be able to prove you have the income to re-pay the loan. This might work if you have one borrower still working who can qualify for the mortgage on their own.
• Assistance under the Homeowner Affordability & Stability Plan. In February the Government announced a new plan designed to help homeowners avoid foreclosure and stay in their homes through several different avenues. For more on the overall plan see the press release. To see if you qualify, click here where you can take an online self assessment quiz and find links to speak to a HUD-Approved housing counselor for additional help.

Third, continue calling all your creditors to negotiate lower payments, interest rates on credit cards or other payment arrangements. Even on your services like phone, internet and cable call your provider and ask for a discount or explain your situation and ask what they can do to help you. The economic downturn has affected almost everyone and rather than lose your business, they’d like to retain your future business by helping you today.

It goes without saying, but I’ll say it anyway – file for unemployment benefits as soon as you lose your job. Don’t wait, it may take several weeks for them to process your application and get your paperwork in order. Many states allow you to file for unemployment benefits online. To find links to your state’s unemployment office, click here. Recent changes in the stimulus bill passed by the Government extends the amount of time you can collect unemployment from 26 weeks to now 33 weeks. Some states are even extending that time period based on state initiatives. Another facet of change to the unemployment benefits under the new stimulus bill is an extra $25 per week calculated into your benefits. The final change is making the first $2,400 you receive federally tax-free. After that amount, you pay your normal federal income tax on it.

In closing, the quicker you act the less devastating the results are going to be. Even if you haven’t lost your job, prepare for it anyway because it could very well happen to you or someone you love. Be prepared to monitor your finances weekly and monthly to stay on top of your spending. Get everyone in the family involved and on the same page right at the beginning so that there are no surprises down the road. As always, please let me know if you have questions or need further assistance on this topic by utilizing my Contact Page. If you have some tips or resources to share, please post them here to help your fellow readers! We want to hear from you!

Critical Elements of the “Hardship Package”

First of all, you’re probably wondering what the heck a “Hardship Package” is. I did the first time I heard the term! The hardship package is the term for the group of documents you’ll gather to ask your lender for assistance through a loan modification or short sale. I wanted to outline the package here so you know what each element is and I’ve also included tips for completing the package correctly. Even though your Realtor® will put the package together (if you’re doing a short sale), they may ask you for these elements and you should be ready to produce them quickly. Hardship package requirements vary by lender, but here’s what you can generally expect to provide (items shown with * indicate documents specific to a short sale request):

1. Most recent (consecutive) two years tax returns – Federal return only, include all pages and schedules for all borrowers on the loan(s).
2. Most recent (consecutive) two months bank statements – provide all pages for ALL accounts that you and/or the co-borrower own.
3. Most recent (consecutive) two months pay stubs – for all borrowers on the loan(s).
4. Hardship Letter – this is a letter written by the borrower(s) on the loan in which they ask for the lender to consider a loan modification or short sale (whatever the case may be) and explains to the lender what has happened or what the hardship is that does not allow them to be able to maintain the current financial responsibility for the mortgage(s). It should be short and sweet, as concise as possible – you don’t need to share intimate details of your life.
5. Personal/Household Financial Statement – this is sort of like your budget, most lenders have a standardized format (which you can get for free once you sign up for my newsletter). The financial statement will outline all your income, assets, and expenses to show whether or not you have a surplus of funds each month or you’re in the red every month and are unable to pay.
6. *Purchase Contract – this is the offer from a potential buyer to purchase the property. Each state’s set of documents are different, but some states include a Short Sale Addendum form for buyers that has specific disclosures to the buyer regarding the short sale process: i.e. the acceptance is not bound until the lender(s) issue written approval and also defines the escrow period as beginning the day after the lender’s approval letter is delivered to the buyer’s agent.
7. *Listing Agreement – this is the agreement that the sellers sign to authorize the Realtor® to list and advertise the house for sale. Each state’s set of documents are different, but some states include a Short Sale Addendum form for sellers which contains special disclosures to the seller regarding the short sale process: i.e. there are credit and legal consequences, speak to the appropriate professionals before signing the listing agreement.
8. *Estimated HUD Statement – your Realtor® will obtain this from the title company who will be handling the escrow once the lender approves the sale. It is an estimated net sheet which accounts for all the costs involved in the sale and shows the lender what their potential loss will be. It’s important that this HUD be accurate and include all the payoffs for liens so nothing comes up later in the sale and delays the process. Approval letters from the lender are usually only good for 30 days, so the sale needs to go quickly once approved.
9. Comparative Market Analysis or Broker Price Opinion (a.k.a. BPO) – this isn’t required by lenders, but is usually helpful to show the lender what the property is worth and how the listing price was established. It should support the purchase price negotiated on the Purchase Contract.

Hope this information helps you with your quest! If not, please be sure to drop me a line on my Contact Page with your questions and I’ll be sure to get back to you. Also, I’m totally into networking and sharing – if you have tips to share based on your experience with your lender(s), be sure to leave it here on my Comments section.