Frustrated home owners, lenders clash over Obama program

Frustrated home owners, lenders clash over Obama program

By TODD SPANGLER • FREE PRESS WASHINGTON STAFF • March 5, 2009

WASHINGTON – A day after the Obama administration issued its guidelines to financial institutions for complying with its foreclosure mitigation efforts, confusion reigned.

Many Michigan homeowners contacted the Free Press throughout the day today with word that lenders and loan servicing companies seemed to lack an understanding of what the Obama plan hoped to accomplish. Some were told they were not eligible when, under the guidelines, it appeared they might be; others were told that since they’d already gotten a loan modification earlier, they wouldn’t be able to get another – a premise the Treasury Department flatly denied to the Free Press on today.

Clearly, it was going to take some time for lenders and loan servicers to catch up with the guidelines issued Wednesday by the Treasury Department and other federal agencies. Struggling homeowners, however, had no trouble grasping help might be on the way and picked up the phone.

Kenya Brown, a 39-year-old foster care worker for the state, got a previous modification through Countrywide and was told Wednesday she wouldn’t be eligible for another under the new program. Meanwhile, she’s spending about half her monthly income on a $115,000 home in Harper Woods with a $146,000 note on it.

The lender’s comment notwithstanding, she’s going to keep at it – calling regularly in hopes of getting her loan modified so she can pay less each month.

“It’s getting to the point where I’m getting desperate,” she said.

Countrywide’s owner – Bank of America – said Wednesday it intended to take part in the modification program – at least as much as its contractual obligations would allow it to do so. Many other loan servicing companies did so as well.

The program works on two separate prongs – one for refinancing, the other for loan modification.

On the refinancing end, lenders who owe no more than 105% of the current value of their home can qualify for a low interest loan through Fannie Mae or Freddie Mac if those government-sponsored institutions already own or back the loan. Many people don’t know if Fannie and Freddie have their loan, so you have to check through the company that sends you the monthly statement or the companies directly at www.fanniemae.com or www.freddiemac.com .

But a lot of people in Michigan owe a lot more than 105% of the value of their homes, since property values have stumbled so badly as the local – and the national – economy tanked. Those people, however, may still be eligible for the loan modification part of the plan.

And that has nothing to do with how much you owe on the house or its current value.

That part of the plan is about loan modification.

It is based on what portion of your monthly gross income goes to pay your mortgage, home taxes, property insurance, and homeowner’s association or condo fees. Because if it’s more than 38%, the Obama plan is offering lenders and loan servicers financial incentives – and a bit of a stick in the form of future money from the Wall Street rescue fund – to modify interest or principal on loans to bring it down to that level. Once it’s at that point, the government will match dollar-for-dollar to bring it down to 31% of a borrower’s monthly income.

Again, word from the Treasury Department today was that any earlier modification should not effect participation in this program. While it’s voluntary for lenders and loan servicing companies, many suggested they would take part.

“It’s like no one has any information on this,” said Antonio Motley, a 39-year-old American Axle worker who lives in Wayne. He only owes about $67,000 on his house – but values have been hit so hard in his community he expects his home is only worth about $50,000 tops. Meanwhile, he’s taken a $10 an hour cut in pay and thinks he might be in line for a modification.

He’s been calling his lender ever since he heard President Barack Obama announce the program two weeks ago. On Wednesday, Countrywide told him to call back next week.

“I’m current,” he said, “but I’m struggling.”

There are some resources out there for people who want to research what they might be eligible for under the new plan. The first Web site to visit is www.financialstability.gov and click on the Make Home Affordable sections. If you want to research further, try www.treasury.gov, and click on the story in the center of the page. Down at the bottom of that story, you’ll find some detailed releases on the ins and outs of the program. There’s information, too, at the U.S. Department of Housing and Urban Development site, www.hud.gov.

Not everyone was pleased with the plan, however. Far from it.

Several people who called or emailed the Free Press on today were angry: upset that taxpayer money might be used to help prop up borrowers they believe bought properties beyond their means while the callers or writers had practiced restraint.

“Way too many people are willing to look for ways to make easy money and all is fine as long as things go their way,” wrote Blane Swenson, a 49-year-old accountant in South Rockwood. “But when the tide turns, suddenly everybody who is upside down on a mortgage is a ‘victim’ and looks to Big Brother to bail them out.”

What you should do ...

IF YOU OWE MORE THAN YOUR HOME IS WORTH:

You could qualify for refinancing into a low-interest loan through Fannie Mae or Freddie Mac if they already own or back your home loan. Many people don't even know if Fannie or Freddie hold their loans, so call the company that sends you your statement each month and ask. You also can go directly to Fannie and Freddie's Web sites ( www.fanniemae.com and www.freddiemac.com ), which have inquiry boxes where you can fill in your information and find out if they have your loan. Or you can call them: 800-732-6643 for Fannie and 800-373-3343 for Freddie.

Remember though, the refinancing will be available only to people whose outstanding loan amounts are 105% of the current value of the home. (For example, on a home with a current market value of $100,000, you could owe up to $105,000.)

If you qualify, call the company that sends you the monthly statement and tell it you're interested in the Home Affordable Refinance application process.

IF YOU'RE INTERESTED IN A LOAN MODIFICATION:

Start by answering these questions:

• Is the property your primary residence?

• Is the amount you owe on your first mortgage equal to or less than $729,750?

• Are you having trouble paying your mortgage?

• Did you get your current mortgage before Jan. 1, 2009?

If you can answer yes to all of those questions, you may be eligible for help under the Making Home Affordable Program, which encourages lenders and loan servicers -- through incentives -- to bring down the borrower's total monthly home cost (mortgage, taxes and insurance) to no more than 31% of the borrower's income.

If you think you qualify, gather as much information as you can about income -- including pay stubs, your most recent tax return, account balances and minimum payments on credit cards and loans, etc. Then contact the company that sends your monthly mortgage statement, asking to be considered for a Home Affordable Modification.

For more information, go to www.financialstability.gov .

We want to know if it's working for you

We'd like to hear how the president's plan to keep people in their homes is working and whether you're getting the help it promises. As you work through the system, please let us know how it is going, for better or worse.

You can contact Free Press staff writers Todd Spangler at 202-906-8203 or tspangler@freepress.com or Greta Guest at 313-223-4192 or gguest@freepress.com.

GoGetEmTigers wrote:

• Is the amount you owe on your first mortgage equal to or less than $729,750?

Who the hell came up with that number?

catbox_9 wrote:

GoGetEmTigers wrote:

• Is the amount you owe on your first mortgage equal to or less than $729,750?

Who the hell came up with that number?

Washington idiots

I mean $750,000 would make sense or even $700,000 or $800,000 but $729,750? Why not $729,747.68?

GoGetEmTigers wrote:

catbox_9 wrote:

GoGetEmTigers wrote:

• Is the amount you owe on your first mortgage equal to or less than $729,750?

Who the hell came up with that number?

Washington idiots

More like socialist idiots