Know An FHA Borrower Struggling With Mortgage Payments?
FHA LOANS, REAL ESTATE LEGISLATION, TIPS FOR SELLERS
February 1st, 2010
President Obama signed into law a program to assist FHA borrowers experiencing financial hardship before they fall behind in payments. The Helping Families Save Their Home ACT of 2009 grants FHA broader authority to hopefully prevent FHA borrowers from slipping into foreclosure. Prior to this law taking effect, borrowers had to be behind in payments before seeking loss mitigation assistance. Late payments usually cause an immediate drop in credit scores which then can trigger credit card issuers to raise interest rates.
FHA sees this new program as a win-win for borrowers who get to keep their home and FHA protects their insurance fund from unnecessary losses. Here are some additional details:
- A borrower considered “facing imminent default” is one that is current on payments or less than 30 days late but has experienced a significant reduction in income or some other hardship that will prevent making future payments in a timely fashion
- Allows for a forbearance agreement to be created that allows the loan servicer to postpone, reduce or suspend payments due on a loan for a specific amount of time
- Allows qualified borrowers to reduce their payments permanently through an interest rate reduction or loan reamortization to an affordable level by using a portion of their insurance with a loan modification. Principal deferred becomes an interest free subordinate loan which is repaid once the first loan is paid off
The hardship must be documented by the borrower to the loan servicers satisfaction. The cause of hardship may include one or more of the following:
- Unemployment, reduced job hours, reduced pay, or a decline in business for self-employed would all be considered as reasons for loan modification. A scheduled temporary shutdown of the employer would not be reason enough to qualify for a loan modification
- Death in the family, permanent or short term disability or serious illness qualify as hardships
The loan servicer makes the final decision. If you know someone struggling to make house payments, ask them if they have an FHA loan. If so, direct them to HUD’s website or contact me for further information.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL LIVING REAL ESTATE PROFESSIONALS
CORNER OF COURT AND PLACER IN REDDING
MORE THAN A QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
