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Having Trouble Paying Your Bad Credit Mortgage? New Making Home Affordable Changes Might Help You

By Barbara Marquand
Mortgage Credit Problems Columnist


If you're struggling to pay a high-rate bad credit mortgage, then refinancing is an obvious course to consider. You can get up to four free quotes from lenders by filling out the form on this page.

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But if you're underwater on your mortgage, as many Americans are today, then help through the federal government's Making Home Affordable program is another avenue.

The program has come under fire for sluggishness, but the Consumer Federation of America says recent changes by the Obama administration make the program more relevant and increase its chances for success. Here's a look at the changes and what they mean for you:

  • Have an FHA Loan? Declared Bankruptcy? You're Eligible
  • Timeframes have been clarified, and incentives have been increased for mortgage servicers to provide permanent modifications. (Your servicer is the company that collects your monthly mortgage payments.) Borrowers in bankruptcy who request modifications must now be considered, and homeowners with FHA loans are now eligible.

  • Affordable Housing Assistance
  • Payments for relocation assistance were doubled for homeowners receiving foreclosure alternatives. Incentives were increased to encourage loan servicers and lenders to extinguish subordinate liens and to encourage more short sales and other alternatives to foreclosure, so homeowners can get into affordable housing faster.

  • Mortgage Principal Write-Offs
  • Incentives were increased for loan servicers to write-down mortgage principal. A new approach allows some underwater homeowners to lower the principal balance on their mortgages in steps over three years.

  • Unemployed with a Bad Credit Mortgage? Temporary Help Available
  • If you're out of work (you must be collecting unemployment insurance), you could get your mortgage payments reduced for three months, and possibly up to six months, while you search for work. The mortgage payment is set at 31% or less of your income while you're out of work. If you find a new job during that period and your mortgage payment is more than 31% of your income, then you must be considered for a mortgage modification.

The new rules are complex. Go to the Making Home Affordable Web site to learn more about the details, determine if you are eligible and fill out the forms to request a modification.

Sources

http://moneywatch.bnet.com/ / http://www.suntimes.com/ / http://makinghomeaffordable.gov/ / http://www.consumerfed.org/

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