Underwater Homeowners May Get Mortgage Help Soon

New Hope for Mortgage Relief

While the Bogans were unsuccessful, to date a little more than 1 million homeowners have received a permanent HAMP loan modification on their mortgages. In fact, since 2007 the industry has completed more than 6.43 million permanent solutions outside of foreclosure, including non-HAMP loan modifications and short sales, reports Hope Now, a Washington, D.C., group composed of counselors, mortgage companies, and investors.

“This figure compares to 4.5 million foreclosure sales in the same period of time and shows that real progress has been made by the industry, nonprofits, and government on behalf of at-risk homeowners since the housing crisis began,” states Hope Now Executive Director Faith Schwartz.

Recent changes have been made to HAMP in an effort to increase the number of eligible homeowners in the hopes of preventing future foreclosures. Effective June 2012, HAMP Tier 2 expanded the qualifications for a loan modification and other relief through the Home Affordable Unemployment Program, the Home Affordable Foreclosure Alternatives Program, and the Second Lien Modification Program.

The revised HAMP program is an outgrowth of the foreclosure settlement reached in February. Prompted by homeowners’ complaints and following a series of extensive investigations conducted by attorneys general around the nation and a coalition of federal agencies, federal and state officials announced a $25 billion deal with the nation’s top five lenders–Bank of America, Wells Fargo, JP Morgan Chase, Citigroup, and Ally Financial–to settle fraudulent and abusive mortgage and foreclosure practices.

The settlement seeks to resolve violations of state and federal laws, which were outlined by the Department of Justice: the use of robo-signed (routine electronic sign-off) affidavits in foreclosure proceedings, deceptive offers of loan modification, failures to offer loan modifications and non-foreclosure alternatives before foreclosing on federally insured mortgage, and filing improper court documentation in federal bankruptcy court.

“Under the terms of this settlement, America’s biggest banks, banks that were rescued by taxpayer dollars, will be required to right these wrongs. That means more than just paying a fee,” President Obama said in a statement. “These banks will put billions of dollars toward relief for families across the nation. They’ll provide refinancing for borrowers that are stuck in high interest rate mortgages [the national average for a 30-year fixed-rate mortgage is around 4%]. They’ll reduce loans for families who owe more on their homes than they’re worth [referred to as underwater]. And they will deliver some measure of justice for families that have already been victims of abusive practices.”

Underwater homeowners who are behind on payments can now get help in getting their principal balances negotiated down. And homeowners who are not behind on their mortgage payments can refinance–allowing them to save roughly $3,000 a year. Also, roughly 750,000 former homeowners, who were improperly foreclosed upon between September 2008 and December 2011, are eligible to receive one-time restitution payments of about $2,000. The settlement prohibits banks from foreclosing on homeowners while the banks review their loans.

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