How is this happening?

Some 4.2 million mortgage borrowers are either seriously negligent or have had their cases handed over to lawyers to pursue foreclosure auctions. Of the 4.2 million, two-thirds have made no payments at all for at least a year, and nearly one-third have gone more than two years.

565 days is how long it takes to foreclose on borrowers in default from their first missed payments to the final auction. In New York, the average is 800 days and in Florida, where the “robo-signing” issue took place, it’s 807.

It seems borrowers have found a way to remain in their homes – by fighting evictions hard and waiting for their cases to be worked through.

The good

The Florida couple that hasn’t paid in five years has been fighting their evictions in court. They bought their home in 2003 with an adjustable rate mortgage. After a few years, their monthly payments tripled to $3,000, just as their home-inspection business was going down.

They are trying to get the court to agree to let the bank modify the mortgage so payments are affordable. Things seem to be looking good but if they lose, they’ll finally have to leave. And, unfortunately, more than 50 months of missed mortgage payments hasn’t translated into big savings.

The other Florida resident purchased a two-bedroom on Tampa Bay in 1998 for $135,000.

As the property’s value skyrocketed to $750,000, she refinanced twice (once to expand a business), and took out a second mortgage. She now owes more than $600,000 on the home, which is worth only $235,000.

The actor from California began having problems during the screenwriters’ strike in late 2007, followed by a threat of a strike by the Screen Actors Guild.

He’s been working with his lender toward a mortgage modification, submitting page after page of documents, which the bank has often misplaced or waited so long to examine them that they had grown too old to use.

His ideal outcome is get the loan modified, with all his late fees waived. He feels entitled to that because the bank advised him to stopped paying in the first place to qualify for one of the government’s foreclosure programs. Before that, he had missed only one payment.

In the meantime, he has found some sources of income taking small acting parts, teaching acting classes and even doing handyman work.

Another, a NY-resident has been trapped in a particularly bad adjustable rate mortgage. He stopped paying more than three years ago. His attorney though has managed to keep him off one foreclosure.

But this NY-resident is still struggling to find work, has little in savings despite the missed payments.

The ugly truth

Each person has found some sort of a way to keep his or her property amidst a possible foreclosure. But, with all of life’s uncertainties, there’s no doubt that living in a “foreclosure limbo” is hell.

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Bank of America Corp. (BAC)

As part of a federal program to help economically troubled states with home loans, the BAC has begun working with homeowners and state and federal authorities in 18 states and Washington D.C., all of which are part of the Hardest Hit Fund (HHF). The bank launched pilot programs since December, January and February, but the went full-force in March.

The bank, which has received 2,700 applications, has already helped 700 borrowers with payments totaling $2.8 million.

Along with the BAC, Ally Financial Inc.’s GMAC Mortgage unit is also working in all 18 states and Washington D.C.

The large initial response is a sign that many homeowners still need help. The HHF program was aimed at states with the biggest unemployment problems. It  provides a bridge for borrowers that need assistance. And these people need the assistance, because they have lost their jobs, but don’t qualify for other modification programs.

Because modifications require homeowners to be able to make monthly payments, servicers have been unable to offer much help to those who are unemployed.

The BAC has struggled to deal with a massive pile of mortgages created during the housing bubble that continues to sour with the drop in home prices. Still, the BAC continues to try to provide homeowners with as many options as possible for affordable and sustainable payment relief.

The states involved are Alabama, Arizona, California, Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, Tennessee and Washington D.C.

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The Numbers

The maximum amount of the loan is $417,000. There are no down payments, but if you want to buy a more expensive home then you have to put down 25% of the home’s price and pay a slightly higher rate.

Right now, the mortgage rate is at a low fixed rate of 4.625% for 30 years, which means your monthly payment on a $417,000 loan will only be $2,144, plus property taxes and insurance.

When you take out a VA loan, the closing costs ($1,500 or less) as well as the VA funding fee of 2.15% of the loan amount are added to the new loan. You’ll also need to pay $425 for an appraisal. But if you have a service-related disability, you won’t have to pay the fee.

Refinancing

You can use a VA loan to refinance an existing mortgage. You can borrow up to 90% of the appraised value of the home, taking out cash to pay off other debts if there is equity available. You will still have to pay $425 for an appraisal, although there should be no other fees required to apply for the loan.

For a refinance, the VA funding fee differs. If you are refinancing an existing VA mortgage, the fee is only half of 1%. But if you convert from a conventional mortgage then the VA funding fee is 3.3%.

There is no monthly mortgage insurance (PMI), so payments are lower than comparable standard loans that require PMI when there is less than 20% equity in the deal.

The Loan

If you aren’t sure if you are eligible, here are some of the basic requirements:

• Honorable discharge from the military
• Certificate of eligibility
• Credit score above 640
• Must have a steady income, a two-year history of self-employment or a stream of retirement benefits
• Total debt payments shouldn’t be more than 41% of your income
• No unpaid liens or judgments
• If you filed for bankruptcy you must wait two years, with all payments made
• Spousal income can help you qualify

The loan has no age restrictions and you can get a new loan even if you had one before (as long as it was paid off). Surviving spouses with benefits also qualify if they have not remarried. There are also good loan deals for those seeking to refinance an existing loan.

The property has to be owner-occupied, meaning it can’t be used for anything other than as a place to live.

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If you belong to one of these 18 states (including Washington D.C.), then you might be eligible to receive the Hardest Hit Fund money (list includes state program’s website):

• Alabama: http://www.hardesthitalabama.com/
• Arizona: https://www.savemyhomeaz.gov/
• California: https://www.keepyourhomecalifornia.org/
• Florida: https://www.flhardesthithelp.org/
• Georgia:http://www.dca.state.ga.us/housing/homeownership/programs/hardesthitfund.asp
• Illinois:http://www.ihda.org/
• Indiana: http://www.877gethope.org/
• Kentucky: http://www.kyhousing.org/
• Michigan:http://www.michigan.gov/mshda/buyers/save_the_dream/helping+hardest+hit+homeowners+-+contact+your+mortgage+servicer+for+assistance
• Mississippi: http://www.mshomecorp.com/firstpage.htm
• Nevada: http://www.nahac.org/
• New Jersey:http://www.state.nj.us/dca/hmfa/home/foreclosure/homekeepers.html
• North Carolina: http://www.ncforeclosureprevention.gov/
• Ohio: http://www.savethedream.ohio.gov/
• Oregon: http://www.oregonhomeownerhelp.org/
• Rhode Island: http://www.hhfri.org/
• South Carolina: http://www.scmortgagehelp.com/
• Tennessee: http://www.thda.org/
• Washington D.C.: http://www.dchfa.org/

Assistance Programs
Here is a list of assistance programs (and their descriptions) in the areas listed above:

• Principal Reduction: Low-income and moderate-income homeowners with homes that have a mortgage balance much higher than current market value may receive some funds to reduce the unpaid principal balance on the mortgage. But the mortgage lender has to match the amount the state puts up to double the principal reduction for the homeowner. Take note that the lender will require homeowners to prove that they’ve experienced a financial hardship before granting a principal reduction.
• Unemployment Mortgage Assistance: Homeowners who have lost a form of income due to unemployment, underemployment or a medical condition and can prove they are in danger of falling behind in their mortgages may qualify for up to $3,000 per month in mortgage payment assistance in California for up to 36 months (the the maximum monthly assistance might differ in other states).
• Loan Modification/Reinstatement: For homeowners who fell behind on their home loans during a temporary economic crisis, up to $15,000 will be available to help bring them back to course.
• Second-Lien Reduction: Uncooperative second-lien-holders (like the lenders and servicers of second mortgages and home equity loans and lines of credit) are often the deal-killers that prevent short sales or other loan workouts from happening. Some states will offer funds to reduce the balances on these second liens.
• Transition Assistance: Homeowners who can’t afford to keep their homes and agree to a short sale or deed-in-lieu-of-foreclosures may qualify for assistance with moving expenses and the costs associated with securing new housing.

Requirements

All programs require the following of the homeowner:

• Prove economic hardship
• Not have taken cash out of their home via a refinance or second mortgage/line of credit
• The homeowner actually lives in the home (i.e., these programs don’t work for income properties)
• Meet income guidelines

There are many scenarios where mortgage lenders and servicers don’t have to do anything for the homeowner in order for them to receive state funds.

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The Section 203(h) program provides mortgage insurance for those who have lost their homes because of a major disaster and are in the process of rebuilding or buying another home.

Disaster assistance

Individuals whose homes are located in an area that the President has declared a disaster zone are eligible for this program.

If your home was destroyed or damaged, and needs reconstruction or replacement, your insured mortgage may be used to buy or rebuild your principal residence. The following rules below apply:

• No down payment required. You are eligible for 100% financing. Closing costs and prepaid expenses, however, must be paid in cash or paid through premium pricing or by the seller, subject to a 6% limitation on seller concessions.

• FHA mortgage insurance is not free. Mortgage lenders collect an up-front insurance premium (which may be financed) from you at the time of purchase, as well as monthly premiums that are not financed, but instead are added to the regular mortgage payment.

• Some fees are limited. There are limits on some of the fees that lenders may charge in making a mortgage.

• There are limits on the amount of insurance that a person may receive. The current FHA mortgage limit can be viewed online. These vary over time and by place, depending on the cost of living and other factors (higher limits also exist for two to four family properties).

Application

You must submit your application for mortgage insurance to your lender within one year of the President’s declaration of the disaster. Mortgage insurance processing and administration for this and other FHA single-family mortgage insurance products are handled through HUD’s Homeownership Centers.

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Among other disaster relief policies provided by Freddie Mac, they also urged its servicers to reduce or suspend mortgage payments for up to 12 months for borrowers with Freddie Mac-owned mortgages that have been affected by a disaster. Each case must be individually assessed to determine what assistance will best fit the homeowner’s circumstances.

Other policies required by Freddie Mac from its servicers are:

• To monitor and coordinate the insurance claim process
• To provide help with options for local, state or federal disaster assistance
• To not assess penalties or late fees against borrowers with disaster-damaged homes
• To not report forbearance or delinquencies caused by the disaster to credit bureaus

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VA strongly urged mortgage companies to stop any new foreclosures in the disaster areas for the next 90 days, suspend reporting to credit bureaus and waive late charges to help ease the problems of those affected by the disaster.

There are about 26,000 Veterans with VA-guaranteed home loans all across Alabama, Arkansas, Georgia, Mississippi, and Tennessee, all of which have been declared eligible for assistance by the Federal Emergency Management Agency (FEMA).

Affected Veterans

Affected Veterans seeking disaster assistance should do the following:

• contact their insurance company as soon as possible to file claims for losses
• contact their mortgage companies to let them know their circumstances
• apply for Disaster Assistance immediately

Disaster areas

If you live in one of these counties in Alabama, then you are eligible to receive disaster assistance: Autauga, Calhoun, Cullman, DeKalb, Elmore, Etowah, Franklin, Jefferson, Lawrence, Marengo, Marion, Marshall, St. Clair, Sumter, Tallapoosa, Tuscaloosa and Walker.

If you live in one of these counties in Arkansas, then you are eligible: Benton, Clay, Faulkner, Garland, Lincoln, Pulaski, Randolph and Saline.

If you live in one of these counties in Georgia, then you are eligible: Bartow, Catoosa, Coweta, Dade, Floyd, Greene, Lamar, Pickens, Polk, Spalding, Troup and Walker.

If you live in one of these counties in Mississippi, then you are eligible: Clarke, Greene, Hinds, Jasper, Kemper, Lafayette and Monroe.

If you live in one of these counties in Tennessee, then you are eligible: Bradley, Greene, Hamilton and Washington.

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Because of this, many homes will definitely be affected. And since standard homeowners insurance doesn’t cover flooding, it is important to have protection from the floods. This is where the National Flood Insurance Program (NFIP) comes in.

The NFIP offers flood insurance to homeowners, renters and business owners if their community participates in the NFIP. Participating communities agree to adopt and enforce ordinances that meet or exceed FEMA requirements to reduce the risk of flooding.

The requirements

Flood insurance differs for each property, based on their Risk Profile.

Homes and buildings in high-risk flood areas with mortgages from federally regulated or insured lenders require flood insurance. These areas have a 1% or greater chance of flooding in any given year, which is equivalent to a 26% chance of flooding during a 30-year mortgage.

Homes and businesses located in moderate-to-low risk areas that have mortgages from federally regulated or insured lenders don’t usually require flood insurance. However, flood insurance is highly recommended. People outside of high-risk areas file over 20% of NFIP claims and receive one-third of disaster assistance for flooding. When it’s available, disaster assistance is typically a loan you must repay with interest.

The rates

Rates are set for every insurance company or agent. These rates depend on many factors, such as the date and type of construction of your home, along with your buildings level of risk.

The coverage

Flood insurance protects two types of insurable property: building and content. The first covers your building; the second covers your possessions (land is covered).

Building coverage includes:

• The insured building and its foundation
• The electrical and plumbing system
• Central air conditioning equipment, furnaces, and water heaters
• Refrigerators, cooking stoves, and built-in appliances such as dishwashers
• Permanently installed carpeting over unfinished flooring

Content coverage includes:

• Clothing, furniture, and electronic equipment
• Curtains
• Portable and window air conditioners
• Portable microwaves and dishwashers
• Carpeting that is not already included in property coverage
• Clothing washers and dryers

The two most common reimbursement methods for flood claims are Replacement Cost Value (RCV) and Actual Cash Value (ACV). The RCV is the cost to replace damaged property. It is reimbursable to owners of single-family, with primary residences insured to within 80% of the buildings replacement cost.

All other buildings and personal property (i.e. content) are valued at ACV. The ACV is the RCV at the time of loss minus physical depreciation (e.g. how old an item is). Personal property is always valued using the ACV.

Below is the flood coverage limits for a standard flood policy:

• One to four-family structure – $250,000
• One to four-family home contents – $100,00
• Other residential structures – $250,000
• Other residential contents – $100,000
• Business structure – $500,000
• Business contents – $500,000
• Renter contents – $100,000

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LINKS:

NFIP Summary of Coverage .pdf: http://www.floodsmart.gov/floodsmart/pdfs/NFIP_Summary_of_Coverage.pdf

The mortgage giants have cost taxpayers $150 billion and many in both Republican and Democratic parties want private lenders to finance a bigger share of the nation’s $11.3 trillion residential mortgage market. But it’s turning out to be a lot harder than supporters thought.

In the Republican-run House, leading supporters of disposing Fannie and Freddie aren’t predicting victory. As a precaution, they’re pushing forward eight bills, taking small swipes at the issue. Democrats, including President Obama, also agree that Fannie and Freddie should be eased aside to get private lenders back in the market.

The Republicans generally want to move faster and further. But some worry that removing the federal role in the mortgage market could devastate the housing industry and perhaps the entire economy, especially since housing is still staggering from foreclosures and low prices. Without the government guarantee of mortgage products that Fannie and Freddie enjoy, the cost of mortgages would likely increase, making homes less affordable.

The role of Fannie Mae and Freddie Mac

Fannie and Freddie don’t give out mortgages. They buy them from the original lenders, which, in turn provides cash for more loans. They then package many mortgages into securities that they resell to investors, using a government guarantee that lets them pay a lower amount than their few competitors.

The government took them over in September 2008 under President Bush as the housing market crumbled. Taxpayers have since paid $154 billion to keep the two companies alive, which is now showing its effects as efforts to trim record budget deficits have become a prime national issue.

How the Republicans and Democrats plan on getting rid of Fannie and Freddie

The Obama administration has offered three options for phasing out Fannie and Freddie, with varying degrees of continued federal involvement, but the subsequent decisions were left to Congress.

The administration has said it is taking steps aimed at reducing the two companies’ housing roles and creating room for private lenders to move into the market. They include gradually increasing the fees Fannie and Freddie charge and reducing the size of their loan investments.

House Republicans have taken similar steps in eight small bills they pushed through a subcommittee this month. They have also gone further, cutting the pay of Fannie and Freddie executives to government-level salaries and ending the companies’ mandates to back mortgages for lower-income people.

Those against the change

Working hard against the changes are the National Association of Realtors, the National Association of Home Builders and the Mortgage Bankers Association. While all are major Washington players, the realtors are especially potent: The $3.8 million they donated to more than 500 congressional candidates in the 2010 election was highest among all political action committees, according to the nonpartisan Center for Responsive Politics. This year, they’ve spent another $18 million lobbying.

They believe that the move is political and not based on the reality of what is best for the housing finance system. They also share the same sentiments as some of those from the GOP, chiefly the lawmakers who are worried about the practical impact of such a move, particularly in districts with high home prices and where the housing market remains especially weak.

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The Weatherization Assistance Program (WAP) was originally only for weatherproofing your home. Weatherproofing was done usually through low-cost methods like weatherstripping doors and windows.

In recent years, though, WAP has expanded to include cost-effective upgrades for heating, cooling and electrical systems.

It now even includes specifics for qualified appliances.

The idea now is that the WAP program aims to maximize your energy consumption for the least amount of money. It also uses short- and long-term solutions.

Why should I get WAP?

You can get an average of around $6,500 from the program, with the most cost-effective solutions to be applied first.  If you can get savings from using WAP money, then you can get ahead in your other bills and needs – just like that.

Safety checks for heating, cooling and electrical systems are part of the safety and efficiency package. Sometimes, States expand the program to combine with LIHEAP, becoming Weatherization Plus.

Am I Eligible?

You could be one of 20 to 30 million families who are eligible nationwide. Each State will have its own set of guidelines, and local energy agencies and organizations handle the program.

There are general guidelines, thankfully:

•             If you receive Supplemental Security Income or other similar program benefits, you may be eligible for WAP.

•             Preference is given to the disabled, children and to people who are over 60 years old.

•             If you fall below 200% of the poverty level, you are eligible.

•             In some States, if your income is less than 60% of the state median level, you are eligible.

How do I apply for WAP?

1) You should call the local state agency office for energy services. In some cases, you may have to contact government approved non-profit organizations.

2) Once you go in to apply, you should have proof of income for the year before you applied. Be prepared for an interview to determine details about your household, such as number of people.

3) If you qualify, you are put on a waiting list. The waiting list usually prioritizes by need. If you are renting, make sure you have your landlord’s permission.

4) Professionals will test your unit or house for efficiency. This may include an analysis of your energy bills. Health and safety checks will also be done. From all these, cost-efficient measures will be planned.

5) Armed with an average of $6,500, program workers will upgrade your unit or house, subject to your final inspection.

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