Thursday, March 26, 2009

The Counselor's Corner

From one missed payment to a critical response intervention...

by Toby Smith

Consider the phases of missed mortgage payments:

Phase 1: Okay, we missed this month’s payment because of the cutbacks, but we can catch up by juggling a few things.

Phase 2: Well, I thought we could catch up, but I didn’t plan on the alternator going out. The car has to get repaired so we can continue to go to work.

Phase 3: Oh my goodness! We are 3 months behind and the phone calls are driving us crazy. Why don’t these mortgage lenders leave us alone!

Phase 4: We’re in serious trouble, but still won’t talk to “them” or open the mail.

Phase 5: An attorney’s office sent us papers today. Maybe we better open the mail and find someone to talk to – NOW!

Phase 6: I have called that counselor 16 times! Why won’t anybody return my call?

Phase 7: The counselor and lender had another long conversation today. We have to come up with the money by next Friday. That’s it.

Phase 8: I can’t believe this is happening. What are we going to do?!?

Does this sound familiar?

It’s amazing how often this scene gets played out in the offices of The Homeownership Resource Center. Equally fascinating though – and less known – is that the situation can still be turned around; even in Phase 8, when things get down to the wire. My colleague, “California cool” Mary Regan is the coordinator of the Critical Response Unit and she often mentions that 3 things must be in place to save a home from auction: a solid budget showing a surplus, stable employment and some cash.

Okay, more than just some cash. Lenders usually will accept either a negotiated amount of the arrearages or the full amount of all past due payments. In Phase 8, there is no room for equivocation; either the home gets saved from auction (and the negotiating continues if the full amount to reinstate the loan is not paid) or sadly, the sale occurs. Fortunately, for many clients, Mary is in place and her saves are becoming the stuff of legend.

We, however, strongly encourage any homeowner in trouble to come see us now…in Phase I…before one missed payment ends up requiring a critical response.

The worst thing you can do is to do nothing. Contact us today. In North and South Carolina, call 888-320-0350.

Friday, March 20, 2009

Free Tax Assistance from IRS

On Saturday, March 21, 250+ Internal Revenue Service Taxpayer Assistance Centers (TAC) will be open nationwide to provide free assistance to tax payers, particularly those who are experiencing difficulties during these tough economic times. Individuals who earn $42,000 or less are eligible for free tax return preparation.

In addition, those who may have a tax issue or be unable to pay their tax bill, can visit an IRS TAC, regardless of income. An IRS representative will work with individuals to set up payment option plans that will prevent greater penalties and interest.

For more information, including participating locations, visit the IRS Web site.

Administration Launches New Consumer Website For Responsible Homeowners Seeking Relief

MakingHomeAffordable.gov Features Self Assessment Tools, Calculators to Help Borrowers Determine Eligibility, Payment Reductions under Administration's Refinancing and Loan Modification Program


Washington, DC-- The U.S. Department of the Treasury and the Department of Housing and Urban Development (HUD) today launched a new website for consumers seeking information about the Obama Administration's Making Home Affordable loan modification and refinancing program. MakingHomeAffordable.gov offers features including interactive self-assessment tools that will empower borrowers to determine if they're eligible to participate and calculate the monthly mortgage payment reductions they could stand to realize under the Making Home Affordable program.

First announced by President Barack Obama in February, Making Home Affordable will offer assistance to as many as 7 to 9 million homeowners making a good-faith effort to make their mortgage payments, while attempting to prevent the destructive impact of the housing crisis on families and communities. MakingHomeAffordable.gov is a joint effort of the Department of the Treasury and HUD.

"Education and outreach is central to the success of our Making Home Affordable program," said Treasury Secretary Tim Geithner. "Putting resources and tools directly in the hands of homeowners will expedite the process of delivering relief to responsible borrowers, and stabilizing the housing market is central to our overall economic recovery."

"The tools offered on this site will help American families access the help they need even faster," said HUD Secretary Shaun Donovan. "Communicating how this program works and who is eligible to those who need it is critical to the program's success, and this website does just that."
Since releasing the guidelines to enable servicers to begin modifications of eligible mortgages under Making Home Affordable on March 4th, representatives from Treasury, HUD and other members of a broad interagency task force have conducted detailed briefings and training sessions for mortgage loan servicers and investors, nonprofit housing counselors and nationwide borrower advocacy groups. Through these early and aggressive efforts to arm those interacting directly with borrowers with information, interagency representatives have briefed more than 2,500 participants on the Administration's plans in the last two weeks.

A wide array of large banks to small lenders have already agreed to participate in Making Home Affordable, and servicers have undertaken steps to proactively engage borrowers and respond to their inquiries related to the new program. For example, JP Morgan Chase has put several special tools into place and initiated proactive solicitations to eligible borrowers around the Making Home Affordable program, including an online site to provide program details and allow borrowers to download a new financial information package; increased staffing in a dedicated service center that provides simple entry point for all borrowers, including CHASE, heritage Washington Mutual and EMC; a partnership with Fannie Mae to solicit over 125,000 eligible borrowers; and solicitation to an additional 180,000 non-GSE eligible borrowers.

With those wheels in motion, the Administration is now accelerating efforts to communicate directly with borrowers about the Making Home Affordable program. Features of the MakingHomeAffordable.gov website launched today include:
  • Extensive information about the Administration's Making Home Affordable plan
  • Self assessment tools to allow borrowers to determine if they are eligible for the program
  • A calculator feature that allows homeowners to estimate the reduction to their monthly mortgage payment that they might stand to realize under the plan
  • Resources to find free, HUD-approved counseling services for borrowers who have additional questions
  • A handy checklist to ensure homeowners collect all the documents they need before calling their servicers

Wednesday, March 18, 2009

New Fannie Mae Loan Lookup Available for Borrowers

As more borrowers become familiar with the Making Home Affordable program, there has been an increase in borrower inquiries regarding the identity of their mortgage investor. To help borrowers answer this question, Fannie Mae has launched the Fannie Mae Loan Lookup for borrowers. The address is: http://loanlookup.fanniemae.com/loanlookup/

This new tool replaces the existing inquiry feature and provides an immediate answer indicating whether or not Fannie Mae is the investor on the loan at a specific address. Borrowers only need to enter their address information to get a result.

Freddie Mac offers a similar tool. Borrowers can visit Fannie Mae’s Web site, fanniemae.com, or Freddie Mac’s Web site, freddiemac.com, to use the new lookup tools. Alternatively, with the borrower’s consent, you may utilize these tools to quickly determine the mortgage investor for the borrower.

For additional details on the Loan Lookup Tool, please review the Frequently Asked Questions for lenders on www.FannieMae.com.

(author: Julie St. Jean)

Trident United Way Success Story

Their Housing Crisis Has a Happy Ending

Keith and Robin Brown earned a good living, owned a nice house in Goose Creek and raised their three teenage daughters. That's when the trouble began.

Keith's job as a civilian contractor at the Naval Weapons Station got cut. He took another job at half pay at Protective Vehicles Inc., but they went out of business. He never got his last paycheck.

Once the Browns got behind in their mortgage the financial woes snowballed. Soon they owed mortgage, plus interest, plus interest on the interest. One day he came home to an auction sign in front of his house. Keith was advised to file bankruptcy. He thought that solved the problem. No one told him that wouldn't protect his house.

Finally, the family connected with Family Services' financial literacy and housing programs. "If it weren't for them, we'd probably be homeless," says Keith. Family Services helped them negotiate a payment plan that worked for the lender and kept the Browns in their home.

Trident United Way invests nearly $200,000 in these programs because they really help hard-working people like the Browns. Last year, all of the financially-strapped families who entered the financial literacy program got up-to-date on their rent or mortgage. This year, the need for those services has increased 50%.

For the Browns, help couldn't have come at a better time. Two of their daughters have entered college and the third one is headed there soon.

Tuesday, March 10, 2009

Making Home Affordable Plan

Since the release of the new Making Home Affordable (MHA) Plan on March 4th The Homeownership Resource Center, a division of Family Services, Inc, staff has been pouring over the program guidelines and supporting documentation. The initial assessment is that the clear guidelines for modifying and refinancing home loans will level the playing field for homeowners. For example, we can cite many cases of clients with similar challenges being offered vastly different solutions to their problems. Now that the criteria are established, we can focus on moving forward. Additionally, we are encouraged that the counseling component includes the development of an action plan – this will go a long way toward maintaining stability.

The MHA Plan is focused on 2 areas, modifying loans for homeowners who can’t make their payments and offering an opportunity for homeowners who couldn’t take advantage of lower interest rates because of declining home values to refinance.

For homeowners who are in danger of losing their homes and haven’t yet taken any action, this is a good time to come forward. The Homeownership Resource Center has established procedures to ensure that all clients will be screened for eligibility. However, it should be stressed that lender participation in the MHA program is voluntary. We have heard that most of them are signing on to the program, but if some decide against it, The Homeownership Resource Center will continue to do everything we can to help clients balance their budgets and remain in their homes.

Since the March 4th announcement, our counselors have been fielding calls from homeowners about what the program means and information will be available at all of our mortgage default
clinics. The bottom line is this: Doing nothing is the worst thing you can do. If you are in trouble, call 888-320-0350, find the default clinic closest to you and go.

Criteria for the modification of a home loan (www.financialstability.gov)
  • Property must be owner occupied.
  • Balance must be less than $729,750.
  • Loan must have been originated before 1/1/09.
  • Mortgages, taxes, insurance and homeowner association dues must be more than 31% of gross income.
  • A significant change in the expenses and income makes the mortgage unaffordable.
Criteria for a refinance – homeowner initiates this process with their lender
  • Property must be owner occupied.
  • Income of the borrower must be sufficient to support the new mortgage payment.
  • The first mortgage must not exceed 105% of the current market value.
  • Loan must be owned or securitized by Fannie Mae or Freddie Mac.
For more information, please call The Homeownership Resource Center toll free at 888-320-0350 or visit http://www.foreclosurehelpforsc.org/.

Monday, March 9, 2009

Debt Settlement May Be Too Good To Be True

Tips on Evaluating Debt Settlement Companies

When the bottom falls out financially, people need help and they need it fast. Being in such a vulnerable situation often makes you susceptible to offers that on the surface may seem good, but in the end leave you worse off than when you began.

The airwaves are filled with ads promising quick relief from debt, and guarantees of happy endings. But all too often, that relief comes at a cost not only to your pocketbook, but to your credit score.

Debt settlement companies, sometimes known as debt negotiators or arbitrators, can make the path to financial freedom sound appealing, but the reality may be very different from the rosy picture painted by the commercials.

Consumer Credit Counseling Services, a division of Family Services, Inc., encourages consumers to thoroughly investigate and understand any debt resolution option, including debt settlement, before selecting it as a way out of their financial distress, and provides the following information to assist consumers specifically when evaluating debt settlement:

  • Debt settlement is a process through which your creditor agrees to accept less than the full amount owed, yet considers the balance as paid. Settlement companies often advertise that they can negotiate reductions of 50 percent or more of the debt you owe. They then set up a repayment plan that typically takes between two and four years.
  • Settlement companies charge significant fees. Different settlement companies have different fee structures, but there are two basic approaches. In one model, the settlement company’s fee will be a percentage of your total debt. The fees in that model typically range from 13-20 percent. Another option the settlement company may offer is to base their fee on the amount of debt reduction they can negotiate. Fees under this model can be as high as 35 percent. In addition, many settlement companies also charge a monthly fee that can range from about $19 - $89 a month for the entire program. Either way, it is not uncommon for settlement fees to total thousands of dollars.
  • Some debt settlement companies front load their fees. In other words, they collect a large part of their fee before you receive any benefit. Much of the money you initially deposit goes to pay the settlement company to satisfy its fees. It can be months after you start the settlement program before your creditor receives any payment.
  • A settlement company may suggest that you stop paying your creditors and instead begin making deposits into a special third-party account. The settlement company will attempt to negotiate a settlement offer with your creditor once enough money relative to the debt is on deposit. This may take six months or more, although the exact length of time will vary with circumstances. During this time, the balance on your debt can continue to grow if interest and various penalty fees continue to be charged by your creditor. As a result, you may owe more than when you started and your credit may suffer because of your failure to make any payments on your debt. Even worse, legal actions such as wage garnishment or a judgment may be filed against you during this time.
  • Debts paid off through settlement will generally show “Paid by Settlement” on a consumer’s credit report. If you later apply for new loans or credit, when reviewing your credit report the prospective lender(s) will see that a previous debt was paid by settlement, indicating that your repayment did not cover the total debt that you owed, but that your creditor accepted a lesser amount.
  • The credit score is based on information contained in the credit report, with the highest consideration given to how you repay your debts. If you’re not repaying the creditor or have missed payments, it will show on your credit report and potentially lower your credit score significantly.
  • The consumer may be responsible for taxes on the forgiven debt. If the forgiven debt totals $600 or more, you will generally owe income taxes on the amount forgiven, substantially reducing the total savings from debt settlement.

The debt settlement industry is largely unregulated thus consumers should exercise extreme caution if they decide to work with a settlement company. Many of these companies are very new and inexperienced. During a time when every penny counts, experience does indeed matter.

Consumer Credit Counseling Services stands ready to assist consumers with any debt situation. Our trained and certified counselors have decades of experience dealing with consumers who see no way out of their debt situation. Call us today at 744-1348 ext. 10 and take your first steps toward financial freedom.