Hope Alliance for troubled homeowners

Last October, as the sub-prime mess was beginning to roil the mortgage backed securities market (and real estate obviously), Treasury Secretary Paulson announced a consortium of lenders (and others) under the banner HOPE NOW.

Recognizing the spiraling out of control mess of foreclosures, bad teaser loans re-setting to potentially higher interest rates, a softening economy with deflating home prices, the Feds needed to “do something”.

According to the Hope Now alliance, it is a cooperative alliance between counselors, investors, and lenders to create a coordinated plan to help homeowners in distress stay in their homes.

Their website doesn’t offer much detailed information, but does say to contact your lender immediately if you are, or think you might be, having trouble making your payments.

Their website is www.HopeNow.com.  Their phone number is 1-888-995-HOPE.

A more helpful site is HomeLoanLearningCenter.com. They have a Foreclosure Prevention Resource Center and provide lender contact information for home owners who may be having difficulty making their mortgage payments.

But before you call, it’s helpful to understand the mortgage “system”. You got your loan either through a mortgage broker or a large lender like Countrywide, B of A, Wells Fargo, etc. Your loan was probably sold in the secondary market. Someone else (the “investor”) owns that loan, not the party you dealt with to get the loan.

But the lender you dealt with may be the “servicer” of your loan, meaning they collect the monthly payment on behalf of the investor, and deal with you, the consumer.

Understand that every lender and investor operates unto themselves, and makes their own business decisions. But having said that, the lenders don’t want your property back through foreclosure.

Hope Now lists 3 options their member lenders are using:

• Repayment plans. A plan that allows the home owner to become current and catch up on their payments, which involves deferring or rescheduling payments, buy the full amount of the loan is expected to be repaid, and within the original contractual maturity date of the loan.
  
  
• Loan modification. Anything that changes the terms of the loan, such as principal reduction, interest rate reduction or extension of maturity date.
  
  
• Work out plan. A combination of the above.

Early controversy surrounded this program because some organizations said Hope Now participants merely stretched out payments and didn’t reduce the interest rate or principal amount, which merely put off the fundamental problem facing the home owner. But data posted in early March by Hope Now shows that more loan modifications and work out plans have taken place.

One positive that’s occurring is that interest rates have come down which is blunting the effect of ARM loans that are starting to reset.

Finally, if a work out plan simply won’t work for you, the next best step is to do a short pay. That means selling your home and getting your lender’s approval to take a financial hit. But for many lenders (and you), that’s much more preferable than a foreclosure.

Like they say, time is of the essence. Don’t delay contacting your lender. Be proactive! Also, document all contacts and conversations with your lender.

If you think a short pay is the best solution for you, call us. We understand your circumstances and will make the transition as stress free as possible.