Mortgage Modification Program

Why Are People Searching for a Mortgage Modification Program?

Earlier this year some of the biggest players in the US mortgage game agreed on a $25 billion settlement package with the government, which ended investigations into incorrect foreclosure practices. This was finally pushed through in April and Mays foreclosure stats seem to indicate that lenders are more confident in pursuing foreclosures than they have been in recent months.

The Bare Statistics - Foreclosure activity kicked on in May, showing an increase of just over 9 percent in foreclosure rates when compared with the previous month. This meant that a total of 205,990 homes experienced mortgage defaults, went through a foreclosure auction or were repossessed by lenders. That figure equates to 1 in every 639 homes having a foreclosure filed against them in May. This was the first time since February that the total number of foreclosures went past the 200,000 mark. Relative to the same month of 2011, the figures still represented a decrease of just over 4 percent.

Foreclosure Trend In 2012: In 2012 we have seen lenders becoming increasing open to short sales and May was no different.

Why is this? Well pushing through a foreclosure is an expensive, time consuming process for lenders and they typically lose more money doing that than they would by allowing a short sale. Statistics show that if a lender allows the borrower to sell short, that sale fetches (on average) $27,000 more than the sale of a home at a foreclosure auction.

Worst Affected States in May

May saw a new name at the top of the foreclosure list. For the first time since the beginning of 2006, Georgia’s foreclosure statistics exceeded those of any other state. 1 out of every 300 homes had a foreclosure filed and that represented a 33 percent jump from April’s figures and a 30 percent increase from the same month last year. Arizona was the second worst affected state and posted figures 24 percent higher than April. This was meant that 1 in every 305 homes had a foreclosure notice drop through their letterbox.

Next up was Nevada, with 1 in every 313 homes receiving the news that they were being dragged into the dreaded foreclosure process. California was fourth, with a rate of 1 in every 324 homes with Illinois and Florida placed fifth and sixth place.

What Are The Top Causes Of Foreclosure?

Close to 5 million foreclosures have been filed in the US over the last couple of years and foreclosure activity is expected to increase as we head into the second half of 2012. But what exactly is causing all these foreclosures? The list you see below runs through some of the most common reasons why a foreclosure is filed.

Unexpected unemployment. Obviously when you take out your mortgage, you have a steady job that provides you with an income. But what happens if you unexpectedly lose that job? The result is normally that you can’t keep up your mortgage repayments and the lender feels there’s no other option but to file for a foreclosure. This has become a common scenario as a result of many companies being forced to cut back on jobs because of the economic downturn.

Illness or injury. Both put huge pressure on your finances, as you might not be able to work which results in a loss of earnings and on top of that you could have expensive medical bills to pay. Usually your health comes before your home.

Death. The death of your partner could leave you in an almost impossible situation if you didn’t buy life insurance because when you took your mortgage out, the repayments would have been calculated on the basis of your joint income. In cases where the person that dies is the main earner in the household, foreclosure is a common end result.

Divorce. As we mentioned above, the mortgage is calculated on your joint incomes if you buy the house together. If you get divorced neither half of the couple is usually able to cover the monthly repayments on their own. What’s more, a divorce is sometimes a drawn out and costly process which may well use finances which were intended for mortgage repayments.

Adjustable Rate Mortgages. In recent years many people signed up to this type of mortgage, as usually the initial monthly repayments are very favorable to the borrower. However, later on the interest rates on your loan may shoot up rapidly, leaving you with monthly repayments you can no longer meet.

Lump Sum Payments. As with the cause we just covered, signing up to a so-called “balloon payment” mortgage could be a disaster in the making. Often the borrower cannot afford to pay off the lump sum and has to look into restructuring the loan as a result. If their earnings have decreased the lender may not allow them to refinance.

Bad Spending Habits. Some people just have no idea how to budget and this proves to be their downfall. When taking out a mortgage, you have to realize that each month you’ll need to set aside enough money to cover the repayment, as keeping your home really should be one of your top priorities.

As you can see from the list above, some of the more common causes of foreclosure aren’t always avoidable. However in some cases foreclosure could be avoided by careful budgeting and only signing up for a mortgage that you are certain is suitable for your financial situation.

Home Loan Modification and the Making Home Affordable Program

The following is a list of the current Home Loan Modification options offered under the MHA plan (taken from www.makinghomeaffordable.gov): Home Affordable Modification Program SM (HAMPSM), Principal Reduction Alternative SM (PRA), Second Lien Modification Program (2MP), FHA Home Affordable Modification Program (FHA-HAMP), USDA’s Special Loan Servicing, Veteran’s Affairs Home Affordable Modification (VA-HAMP), Home Affordable Foreclosure Alternatives Program (HAFA), Second Lien Modification Program for Federal Housing Administration Loans (FHA-2LP), Home Affordable Refinance Program (HARP), FHA Refinance for Borrowers with Negative Equity (FHA Short Refinance), Home Affordable Unemployment Program (UP), Housing Finance Agency Innovation Fund for the Hardest Hit Housing Markets (HHF)