Whitehead was approved through the federal Home Affordable Modification Program, or HAMP. Under the terms of the modification, her monthly mortgage payment was reduced from approximately $1,000 to $700, and her adjustable rate mortgage of 7% was converted to a 30-year fixed rate at 3.8%. In addition, her servicer, Wells Fargo, reduced the principal by $31,000, which included $14,000 in arrears, bringing her mortgage to $125,000. Although she paid $154,000 for her condo in 2005, it’s now worth only about $60,000.

Whitehead fell behind on her mortgage when her dream to become a doctor was delayed after a series of events including a breast cancer diagnosis. “I was in medical school when I bought my house,” she says. “I was approved for a no-doc mortgage by the loan officer with the understanding that once I became a doctor I would be able to afford the mortgage.” Whitehead graduated from medical school in 2006, but without a medical license her various part-time jobs generate $30,000 a year.

Like Whitehead, roughly 58% of homeowners facing foreclosure and seeking counseling services from the National Foreclosure Mitigation Counseling Program report that the primary reason is unemployment or underemployment. Many are also trapped with homes that are underwater, properties that have dropped in value leaving them with negative equity. Various options are available to struggling homeowners, such as forbearance, refinancing, and loan modification, says Mechel Glass, director of education at CredAbility.

The Atlanta-based nonprofit credit and debt counseling agency also participates with the congressionally funded NFMC (http://findaforeclosurecounselor.org). More than 1.2 million homeowners have received counseling through NFMC counselors, with many clients receiving modified loan payments that were reduced by as much as $500 a month.

Continued on next page

“A loan modification is a restructuring of a loan. It can include changes such as a reduction in the interest rate and/or principal amount,” Glass explains. “Other changes that may be made in a modification include extending the period of the loan (from 30 years to 40 years), moving any delinquency to the back end of the loan, or converting it from an exotic type loan (interest-only) to a conservative one (30-year fixed).”

There are caveats: If you are put on a trial payment plan, whereby you make a reduced mortgage payment, it will adversely affect your credit until the modification is officially approved. Also, if the modification isn’t approved, all arrears on the mortgage will be due immediately and the foreclosure process will proceed. Your eligibility for a home loan modification depends on your specific circumstance, says Glass.

Applying for a loan modification or restructuring can be extremely stressful, says Stephfan Nurse, CEO of Tampa, Florida-based Consumer Education (www.consumereducationonline.com).  “This process can be rife with mistakes and bureaucratic snafus. But if you take steps to reduce the opportunities for errors, you’ll have a much better chance of being approved,” says Nurse.

Unfortunately, this isn’t over. For many, it’s been a tragedy with no end in sight. A recent report from real estate research firm CoreLogic Inc. spells out the dire consequences of those caught up in easy borrowing tied to the housing boom: Nearly 40% who took cash out of their residences using home equity loans are underwater, or owe more than their property is worth. To make matters worse, the S&P/Case-Shiller Home Price Indices recently revealed home prices slid 4.2% nationwide in the first quarter, the third straight quarter of such declines after the modest rebound in early 2010. Moreover, home values have fallen a staggering 34% since their peak in 2006 and the National Association of Realtors says inventory of unsold homes will take 9.2 months to unload—roughly 50% higher than what’s considered healthy.

These statistics may be overwhelming, but nothing is more poignant than witnessing the financial devastation of families whose path to prosperity is unraveling before their eyes. I know family members and friends—some drawn into the madness of using homes as trophies and others innocent victims of a collapsing market—who will be forced to spend the next decade repairing self-inflicted damage as they re-evaluate retirement plans.

Though it will not be easy for some to become financially whole again, I’m confident that through serious belt-tightening, better management of resources, and wise counsel, they will get their lives back on track. Their missteps related to homeownership, however, provide valuable lessons for all of us.

First and foremost, your house is your home but can also serve as a long-term wealth-building tool. But it should never be viewed as a piggy bank to fund indulgences. An encouraging 81% of homeowners surveyed in a recent Pew Research Center poll maintain that homeownership still represents the best long-term investment a person can make, even though 47% admit their home is worth less in today’s post-recession economy. I fully embrace their assertion and optimism. After all, we have prominently placed homeownership as a major tenet among black enterprise’s 10 Wealth for Life Principles.

But you must take a disciplined, pragmatic approach to homeownership. In the easy-credit days before the crisis, homebuyers took harmful shortcuts, buying property without solid credit histories, with no money down, and with unrealistic budgets. A good number purchased “McMansions” they just couldn’t afford, leapfrogging from renters to the owners of palatial dream homes without regard to expense or a full understanding of the loan agreement.

Here’s how to approach the process in today’s environment. First, keep your financial house in order—no pun intended—by eliminating unmanageable debt, avoiding nonessential consumption, increasing savings, and preserving credit. Next, reconcile that homeownership is a lifelong process that requires patience, discipline, and guidance.

Beginners should save at least the 20% down payment for a modest starter home to avoid private mortgage insurance, which I consider a costly “second mortgage” payment. In this stage, you should take the opportunity to learn about the financial, tax, and legal implications as well as strengthen your credit and build equity. Only as family and space requirements grow, in concert with your income, should you even consider acquiring a larger home.

At every step of the way, find a home that suits not just your physical but your fiscal needs. According to the National Foundation for Credit Counseling, the rule of thumb is to spend no more than 30% of after-tax income on housing. At the same time, sock away enough money for property maintenance and other emergencies. And don’t even think about applying for a second mortgage to fund lifestyle purchases and other frivolities. Focus on effectively handling your money matters so you can eventually own your home outright.

Your property can serve as your most important investment. Managed properly, it can become part of your story of prosperity and wealth instead of another tale of financial woe.

Ted Parrish, principal of Hennsler Financial Group, says those who invested in the flailing companies during the crash of the housing market now need to re-evaluate their investment goals. As for mortgage holders, Parish says the delisting will have little to no impact. “Operations are still going on with the government backing the companies, and government will back existing mortgages.”

As it stands right now, Fannie Mae and Freddie Mac shares will trade on the Over-the-Counter Bulletin Board, according to the Federal Housing Finance Agency, the companies’ regulator. The OTC is a trading exchange for many penny stocks, says Parrish, not a place you would look to find high quality, long-term investments. “Typically, getting removed from the New York Stock Exchange is a clear indication that a company is going to cease to exist at some point,” he adds.

Friday, Freddie Mac closed at 40 cents per share while Fannie Mae closed at 35 cents per share.

About 11% of African American homeowners have lost their home to foreclosure -- or are at imminent risk.

Communities of color have lost billions in wealth since the current foreclosure crisis began, according to a new report from the Center for Responsible Lending (CRL). Based on their share of total home value and the CRL’s estimated foreclosure rates, the spillover wealth lost to African American communities between 2009 and 2012 as a result of depreciated property values alone will be $193 billion.

“As Congress finishes financial reform legislation, the rules on home lending need to get stronger, not weaker,” said Mike Calhoun, CRL president. “We need to make sure a foreclosure crisis of this type never happens again, and, though so many homes have been lost, it’s not too late to prevent more damage.”

It is estimated that 11% of African American homeowners have already lost their home to foreclosure or are at imminent risk, writes the nonprofit policy organization in the report ”Foreclosures by Race and Ethnicity: The Demographics of a Crisis.”

To reverse the foreclosure trend, the CRL recommends policymakers strengthen efforts to prevent needless foreclosures. While the CRL praises the government’s volunteer Home Affordable Modification Program, it feels it doesn’t go far enough in holding lenders’ feet to the fire. The CRL suggests a multipronged approach to mortgage modification that includes requiring all servicers to engage in loss mitigation and providing authority to bankruptcy judges to modify mortgages on principal residences.

Under the plan, Bank of America will provide “earned principal forgiveness” of up to 30% to homeowners who owe more than 120% of their home’s value and are 60 or more days behind on payments. Borrowers who meet the eligibility requirements of the National Homeownership Retention program as well as the Making Home Affordable loan modification program will be able to take advantage of this plan. The bank says it is offering the principal forgiveness as a way to encourage burdened borrowers to participate in loan modification programs.

However, those with 30-year fixed rate loans are not eligible. Bank of America says it aims to assist those borrowers with loans that often exhibit a high rate of missed payments such as the payment-option Adjustable Rate Mortgage. This is an ARM that lets you choose among different payment options each month. For example, one month you can elect to choose interest-only payments, and another month you can choose limited or minimum payments, which allows you to pay less than the minimum. Consequently, borrowers with these types of loans often end up owing more money.

If you don’t qualify for a loan modification but you’re having difficulty paying your mortgage, you still have some options.

Consider a short sale.
Relief might come from a short sale, which is when you sell your house and the lender agrees to accept less than the agreed upon payoff amount. Although not encouraged because of the impact on your credit score and future ability to get a mortgage, it’s a last resort if you’re in over your head. If you proceed with a short sale, you can expect to see your credit score drop by 200 to 300 points.

Get help.
Seek assistance from a nonprofit housing counseling agency that has been approved by the U.S. Department of Housing and Urban Development (HUD). Free services can be obtained from housing advocates such as Neighborhood Assistance Corporation of America (NACA).    —Sheiresa Ngo

Under the principal forgiveness plan, Bank of America will provide earned principal forgiveness of up to 30% to homeowners who owe more than 120% of their home’s value and are 60 or more days behind on payments. Borrowers who meet the eligibility requirements of their National Homeownership Retention Program as well as the Making Home Affordable loan modification program will be able to take advantage of this plan. The bank says it is offering the principal forgiveness as a way to encourage burdened borrowers to participate in loan modification programs.

Initiative may help some homeowners stay above water.

Bank of America’s plan will begin this May. However, those with 30-year fixed loans are not eligible. Bank of America says it aims to assist those borrowers with loans that often exhibit a high rate of missed payments such as the payment-option Adjustable Rate Mortgage. This is an ARM that lets you choose among different payment options each month. For example, one month, you can elect to choose interest-only payments, and another month you can choose limited or minimum payments, which allows you to pay less than the minimum. Consequently, borrowers with these types of loans often end up owing more money.

If you don’t qualify for a loan modification but you’re having difficulty paying your mortgage, you still have some options.

Rent out part of your home. If you have the appropriate space (for example, you have a house with a mother-daughter apartment), take on a tenant and use the rent to help pay your mortgage. Laws vary by state as far as what is an acceptable living space for tenants, so make sure you review the requirements for your state.

Profit from your talents. You might be talented at cooking or fixing computers. Whatever your gift is, turn it into a profit. Start your own side business and make some extra cash.

Get help. If all else fails, seek professional help. The National Foundation for Credit Counseling offers help with basic budgeting and developing a financial plan. Some community colleges also offer free budgeting workshops and seminars.

Sheiresa Ngo is the consumer affairs editor at Black Enterprise.

Each year we celebrate many holidays in the country, from the Fourth of July to Christmas, and we also celebrate regional holidays as such as Sweetest Day and Juneteenth.  So, I ask you, Mr. President, why not create a new holiday?: The Mortgage Holiday.

Now many of you may be asking: What you are talking about Warren Ballentine?  Well, I am talking about a one year Mortgage Holiday where homeowners will not be required to pay their mortgage for one year! Do have your attention yet?

Here is how it would work:

1.    It would be optional. You only do it if you choose to.
2.    You cannot be more than three months behind on your mortgage.
3.    The interest on your loan will continue to accrue during the “holiday” year.

If a homeowner is paying a mortgage of $1,500 a month on a 30-year fixed at 7%, about $1,275 of that is going towards interest in the first half of that loan. Which means $225 is going against the principle—$225!!! The mortgage holiday puts an extra $18,000 in that homeowners pocket for that year—$18,000!

With the housing market and the economy in disarray this makes perfect sense. The banks will not lose a dime; in fact they will make more money over the course of the loan with the extra year of interest. Homeowners will be able to catch up on their bills and become credit worthy again, thanks to the extra monthly income they have. The economy will rebound more quickly with the extra cash and credit in the market.

So again I ask you, Mr. President: How about a holiday?

Warren Ballentine is a motivatonal speaker attorney, political activist, and host of The Warren Ballentine Show on radio.

A record number of homes are headed for foreclosure, as many as 1.5 million by the end of this year, thanks largely to the subprime mortgage mess. While this is a terrible set of circumstances for the families living in these homes, as well as the economy as a whole, it has put would-be buyers in the driver’s seat. However, this is true for all homes, not just those in foreclosure. There is already a glut of newly-built homes as well as existing homes, with owners offering all kinds of incentives to lure potential buyers. Depending on the market, it is possible to get a great deal on a home that is not in foreclosure, which for most people (assuming you have an income, good credit, and enough cash for a healthy down payment) is far easier, and far less risky, than pursuing a foreclosed property.

That said, if you really want to test the foreclosure market, there are three basic ways to go, each with its own set of challenges and risks.

You can buy property in a pre-foreclosure stage—the time between when the current owner receives a notice of default from their lender and the day the lender puts the property up for auction. This period may offer the best bargains, but it is also the most difficult, because you have to try to cut a deal directly with the owner of the house, who may not even know that the house has been placed on a foreclosure listing. Also, assuming you and the owner can come to terms, you have to complete the transaction quickly, with only a month, depending on the state, before the bank puts the home up for auction. You can go to RealtyTrac.com or Foreclosures.com for information on the foreclosure laws in each state. Unless you are an experienced real estate investor, trying to buy a pre-foreclosed property is an extremely difficult way to go.

However, next to buying a home at auction, buying a home pre-foreclosure may seem like a piece of cake. The auctioning of a home is the next stage of foreclosure. If you want to get in this game, you have to ante up cold hard cash—you can’t finance the purchase of auctioned properties. Plus, you have to buy the house sight unseen, as is—without title insurance. That means if there is a tax lien on the property you bought, you have to pay it off on top of the cost of the property itself. This is only for those with a stomach for risk and lotsof cold hard cash. Of course, if you have that kind of money, you could just buy one of the many non-foreclosed homes on the market.

Bank-owned properties—foreclosed properties that are not auctioned off and become owned by the bank (also known as REO or real estate-owned properties)—will be put it up for sale through a real estate broker. This is the easiest option for those seeking to buy a foreclosed property, but you may not get as good a price as you might with the other two options, as the bank is going to do its best to get a sale price at or near market value for the property. However, the sheer number of foreclosed properties on the market, with thousands more to follow, has put banks under pressure to move these properties, which could give you some leverage in negotiations. Tap the REO Network’s database to find REO brokers in your area.